Financial Crisis Essay

Financial Crisis 2008 Essay
Just after ten years of Asian financial crisis, another major financial crisis now concern for all
developed and some developing countries is "Global Financial Crisis 2008." It is beginning with
the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first
U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets
have fallen, large financial institutions have collapsed or been bought out, and governments in even
the wealthiest nations have had to come up with rescue packages to bail out their financial systems.
(Global issue)
According to the specialists, there are many reasons for this global financial crisis. We try to focus
some prime reasons behind this...show more content...
Declining price attract people with the easy loan facilities of their banks. And banks are ready with
very high risk loans. This excess supply of home inventory placed significant downward pressure
on prices. As prices declined, more homeowners were at risk of default and foreclosure. According
to the S&P/Case–Shiller price index, by November 2007, average U.S. housing prices had fallen
approximately 8% from their Q2 2006 peak and by May 2008 they had fallen 18.4%. The price
decline in December 2007 versus the year–ago period was 10.4% and for May 2008 it was 15.8%.
Housing prices are expected to continue declining until this inventory of surplus homes (excess
supply) is reduced to more typical levels.
Speculation – Speculation in real estate was a contributing factor. During 2006, 22% of homes
purchased (1.65 million units) were for investment purposes, with an additional 14% (1.07 million
units) purchased as vacation homes. During 2005, these figures were 28% and 12%, respectively. In
other words, nearly 40% of home purchases (record levels) were not primary residences. NAR's
chief economist at the time, David Lereah, stated that the fall in investment buying was expected in
2006. "Speculators left the market in 2006, which caused investment sales to fall much faster than
the primary market
Mortgage fraud – Misrepresentation of loan application data and mortgage fraud are other
contributing factors. US Department
Get more content on HelpWriting.net

Global Financial Crisis Essay
Starting from problems of payment defaults on housing loans (subprime mortgage defaults) in the
United States (U.S.), then ballooned damaging crisis of the banking system not only in the United
States but extends into Europe and into Asia. Successive cause a domino effect on the solvency and
liquidity of financial institutions in these countries, among others, led to the bankruptcy of hundreds
of banks, securities firms, mutual funds, pension funds and insurance. The crisis then spread to parts
of Asia, especially countries such as Japan, Korea, China, Singapore, Hongkong, Malaysia, Thailand,
including Indonesia, which happens to have long had the letters beharga these companies.
From the various critiques by experts, that the problem is...show more content...
Lehman Brothers announced a gradual loss before finally bankrupt. On June 16, 2008, the
company announced losses worth 2.8 billion dollars for the second half of 2008. Followed by losses
of 3.9 billion U.S. dollars in part–to–three in 2008 (10 September) and culminate in the
announcement of bankruptcy on September 15, 2008. Similar unrest was also experienced almost
simultaneously by Merryl Linch, Citigroup, AIG and other large financial institutions.
This affected the weakening of the real sector with the bankruptcy of major U.S. companies like
General Motors, Ford, and Chrysler that threaten the continuity of work thousands of employees.
Sure enough, the U.S. unemployment rate rose to 6.7% in line with the increase in pessimism
among consumers and investors throughout the period from September to November 2008. That
is the level of termination of employment (FLE), the largest in the last 34 years. Carrying 533 000
employees laid off and reached a total of 1.91 million persons in 2008. (Source: U.S. department of
labor). Along with that, on 30 November 2008, the U.S. government also announced a decline in
the value of real GDP for part III in 2008 amounted to 0.3%.
Likewise, also in Europe, the banking crisis in Europe was marked by problems at a small bank in
the UK, namely Northern Rock Bank, in mid–2007. Northern Rock is a true small–scale private
bank in the UK. However, when there broke down in

The Global Financial Crisis And The Crisis Essay
Introduction
The Global Financial Crisis, also known as The Great Recession, broke out in the United States of
America in the middle of 2007 and continued on until 2008. There were many factors that
contributed to the cause of The Global Financial Crisis and many effects that emerged, because the
impact it had on the financial system. The Global Financial Crisis started because of house market
crash in 2007. There were many factors that contributed to the housing market crash in 2007. These
factors included: subprime mortgages, the housing bubble, and government policies and regulations.
The factors were a result of poor financial investments and high risk gambling, which slumped down
interest rates and price of many assets. Government policies and regulations were made in order to
attempt to solve the crises that emerged; instead the government policies made backfired and
escalated the problem even further.
Subprime Mortgages
The housing market crash, which broke out in the United States in 2007, was caused by high risk
subprime mortgages. The subprime mortgage crisis resulted in a sudden reduction in money and
credit availability from banks and other lending institutions, which was referred to as a "credit
crunch." The "credit crunch" and its effect spread across the United States and further on to other
countries across the world. The "credit crunch" caused a collapse in the housing markets, stock
markets and major financial institutions across the globe.
Subprime

Following the 2008 Financial Crisis, conventional financial theories have been challenged for their
inability to realistically explain risk. Traditional strategies of asset pricing often rely on a normal
bell curve to make market assumptions, but in reality, the markets do not behave this way. Under a
normal distribution, a majority of asset variation falls within 3 standard deviations of its mean which
subsequently understates risk and volatility. Unfortunately, history would suggest financial markets
do not always act in this manner and rather, they exhibit fatter tails than traditionally predicted. By
definition, fat tails are a statistical phenomenon exhibiting large leptokurtosis. This represents a
greater likelihood of extreme events occurring similar to the financial crisis. Since the magnitude of
fat tails are so difficult to predict, left tail events can have devastating and unexpected effects on
portfolio returns. As a result, sufficiently protecting a portfolio requires tail risk hedging from
unexpected market events.
Normal Distribution In order to understand the significance of tail risks, it is imperative to
understand the notion of a normal distribution and its shortcomings. A normal distribution assumes
that given enough observations, all values in the sample will be distributed equally above and
below the mean. About 99.7% of all variation falls within three standard deviations of the mean and
therefore there is only a .3% chance of an extreme event

The International Financial Crisis in 1929 Essay
The International Financial Crisis in 1929
Throughout the 1920's in Britain there were economic problems. Unemployment was increasing;
therefore there was low domestic demand and large amounts of poverty. Markets were also being
lost abroad, leading to a decrease in trade. However in 1929–31 these problems reached crisis point,
when in 1929 The Wall Street Crash called for an end of American Loans to Britain, and the re–call
of all Britain's debt. This had impact worldwide, as prices for goods slumped due to lack of
demand and business confidence disappeared. In Britain it became clear that the 'Laissez–faire'
policy was not going to work, but there was a divide in thoughts over which policy to adopt...show
more content...
He was, however convinced by King George V to remain as Prime Minister but as leader of a
national coalition government. In order to prove that Labour was a national, responsible party,
Macdonald was prepared to do this, as was Philip Snowden, Chancellor of the Exchequor. Snowden
believed that the budget should remain balanced and Britain should remain on the gold standard. He
therefore supported the May Committee's proposal despite Labour's working class stance. However
Arthur Henderson the foreign secretary did not agree. Henderson was heavily influenced by the
Trade Unions, and felt strongly that Labour should represent the working class, therefore he felt
that if the budget had to be balanced by cutting unemployment pay and raising taxes it was better
for Labour to leave office and leave such policies to the Conservatives or Liberals. This difference
in opinion within the party led to its break up and the formation of a national government due largely
to the proposals if the May Committee.
(c) 'Ramsey MacDonald had no alternative but to form a National Government in 1931.' Do you
agree or disagree with this statement? Explain your answer. (15) After the First World War, Britain
was thrust into a depression. Unemployment rocketed and wages fell dramatically. The most

Essay on Financial Crisis of 2008 Analysis
In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled
throughout Europe and Asia. Many economists consider it the worst crisis since the Great
Depression, and its alarming results are still seen today, a long six years later. Truly, the recession's
daunting size and formidable wake have left no one untouched and can only beg the question:
could it have been prevented? The causes are manifold, but can be found substantially rooted in
illogical investments and greedy schemes. Before any of the risky moneymaking endeavors,
investors traditionally would have gone to the US Federal Reserve to buy treasury bills, a safe and
profitable investment. Later, when interest rates were lowered to only 1% in...show more content...
The banks then created a new idea–linking investors to homeowners through mortgages. Ordinarily,
a mortgage broker would connect a house–buying family to a mortgage lender, who would then
supply them with a mortgage. In this system, everyone is happy–the mortgage broker earns a
handsome commission, the mortgage lender earns a new mortgage, and the family is now a
homeowner in a market of increasing housing prices.
In the new system, an investment banker buys the mortgage from the lender, borrowing millions of
dollars to buy thousands of mortgages, and every month he gets payments from homeowners for
each of the mortgages. The banker then consolidates all the mortgages and splits the final product
into three sections: safe, okay, and risky mortgages, which make up a collateralized debt obligation
(CDO). As homeowners pay their mortgages, money flows into each of the sections, with the safe
filling first and the risky filling last, contributing to their respective names. Credit agencies stamp
the top two safer mortgages with a triple A or triple B rating, which are then be sold to investors
who want a safe mortgage, while the risky slice is sold to hedge funds who want a risky investment.
The bankers make millions, pay back their loans, and investors also make a worthwhile investment.
So pleased are the investors, however, that they want more. Unfortunately, back at the beginning of
the cycle, the mortgage broker can no longer find qualified mortgagers

Financial Crisis Essay
The United States has the biggest financial crisis ever since WWII. Which lasted from September 1,
1939, through September 2, 1945. It was a six–year and one–day battle. Whether or not the
seventy–eight trend is strictly reminding us that revanchism (the political manifestation of the will
to reverse territorial losses incurred by a country) hasn't changed. I recall my economics
professor warning his class at the time that, another crisis will happen soon. So he asked the class,
what do we fear more, inflation or recession? Many answered recession, because if the number of
jobs decreases we will be in trouble and health insurance will be taken away. Most employers are
now seeking for more qualities, and it is just getting harder to get...show more content...
There are at least six different countries in the United States that have universal healthcare coverage
for their citizens. Just as Africa, Asia, Europe, the North America, South America, Oceania and I'm
sure several ahead of us. In the first place, Jacob Zuma, Africa's president accomplished their
healthcare systematic by the poor automatically being enabled to health services and treatments
while the wealthy pay for the hospitalization according to a sliding scale. In Africa, there's a chain of
hospitals, clinics, and dispensaries that provide treatment to the community, with the Social Security
system financing their health services. Even if many people must still cover and pay for part of their
costs due to the amount paid by the Social Security Africa's healthcare system has been unchanged
since 1987.
Secondly, Asia is another country that accommodates for their population with universal healthcare
coverage. Many countries in Asia that provide free public medical insurance include Bangladesh,
Bhutan, Bahrain, China, Hong Kong, India, Iran, Israel), Jordan, Kazakhstan, Macau, Malaysia,
Mongolia, Oman, Singapore, Sri Lanka, Syria, Taiwan, Tajikistan, and Turkmenistan. All the
countries in Asia working as a team. If one country can't provide treatment for a patient, such as
cancer than they refer them out to India, and India being one of the biggest subcontinents in Asia. The

The Global Financial Crisis Essay
Introduction In 2008, the world experienced a tremendous financial crisis which is rooted from the
U.S housing market. Moreover, it is considered by many economists as one of the worst recessions
since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial
crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial
corporations and impoverished individual lives. For example, the financial crisis has resulted in the
collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and
AIG. These collapses not only influenced own countries but also international scale. Hence, the
intervention of governments by changing and expanding the monetary...show more content...
An increase in loan packaging, marketing and incentives encouraged borrowers to undertake
difficult mortgages so they believed that they would be able to refinance quickly at more
favourable terms. People borrowed money to buy the house and then expected the price to rise
and sold so that they could pay off the debt which owed to the bank and demanded a new loan to
buy another house. However, once the interest rate began to rise and house's price dropped in
2007, refinancing became more difficult and banks could not collect their mortgages. Besides, low
interest rates and large inflows of foreign funds created easy credit conditions for years before the
crisis and that simulated the boom in housing construction (Steverman and Bogoslaw, 2008).
Moreover, easy credit and money inflow greatly contributed to U.S housing bubble and the rise of
house's price. In relation to the increase in house's price, the rise of financial agreements such as
mortgage–backed securities (MBS) and collateralized debt obligations (CDO) encouraged investors
to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S,
many financial institutions that borrowed and invested in subprime mortgage reported losses. In
addition, the fall of housing price resulted in default and foreclosure and that began to exhaust
consumer's wealth and

Asian Financial Crisis Essay
In the summer of 1997, an economic and currency crisis rocked the Asian markets. One by one,
Southeast Asian countries such as Thailand, Indonesia, Korea and Japan saw their economies crash
in the wake of heavy foreign investment. An economic boom had made the region an attractive
investment opportunity for much of the 1990s. By 1997, however, domestic production and
development had stalled, and foreign investors grew nervous. A divestment run on the Thai baht
triggered the crash. Large corporations, extremely dependent upon the confidence of foreign
investors failed to meet debt obligations and began to fail throughout Southeast Asia. Currencies
throughout the region faltered and nosedived from their mid–1990s positions of stability. The...show
more content...
at the time, the largest finance company in the country ? alone. (Pesenti et al.,1998). This support of
the highly leveraged private sector by the Thai government lent the appearance of stability to an
unstable system and attracted more foreign loans (to shore up the Thai economy) to Thai financial
institutions.
In February of 1997, the Thai company Somprasong was unable to make maintenance payments on
its high level of foreign debt. This was the first large default in Southeast Asia?s economic crash.
By mid–May of 1997, investor confidence in Thailand was so shaky that Singapore and Thailand
had to step in to prop up the baht in the face of ?speculators who decided Thailand?s slowing
economy and political instability meant it was time to sell.? (Chronology?). In the face of such
instability, Finance One (the largest finance company in Thailand) failed at the end of May. Most of
the company?s lending was made up of risky loans for real estate and stock market margin
investments. Political instability resulted from the resignation of the Thai finance minister, which
further shook foreign investor confidence. ?The strong speculative attack on the baht that followed
forced Thailand to let the currency float on July 2, a key date in the chronology of the Asiancrisis.?
(Pesenti et al., 1998). Once the government was no longer

Market crashes are nearly as old as the invention of money itself. But, as Gillian Tett underlines in
Fool's Gold, "the latest financial crisis stands out due to its sheer size". Economists estimate total
losses could sum up to $2000 to $4000 billion, a number surprisingly not dissimilar to the British
Gross Domestic Product. In its post–mortem, the self–inflicted disaster has commonly brought to
light the question: "Did bankers, regulators and rating agencies fail to see the flaws, or did they fail
to care?" Importantly, it has also created a hunt for scapegoats and quick fixes.
Many Republicans and industry lobbyists have insisted that the financial meltdown would not have
been nearly as bad if not for the deadly Fair–ValueAccounting...show more content...
However, during the financial crisis, the application of the accounting standards was very different,
and did not demand pure FVA.
Firstly, the write–downs were not as apparent as they seemed. Due to the mixed attribute model,
firms were allowed to choose the measurement attribute they desired for a position through how they
classified the position. During the crisis, banks did indeed utilize these safeguards and discretion
built into FVA on their mortgage–based securities. This resulted in the re–classification of many
fair–value assets into other categories in which weaker impairment standards were applied. Hence,
most bank financial assets were valued at amortized historic costs on their balance sheets. With only
trading–type operations reported under fair value principles . This implies that FVA standards would
have made little difference in a bank's balance sheets and regulatory capital ratios. For the same
reason, written–down values were also barely understatements. If anything, they were in fact
overstatements as banks had the individual discretion in determining fair value. Lastly, FVA
standards also allowed the use of valuation models in the calculation of fair values when markets
become inactive, and stated that market prices from forced sales should not be used. Hence FVA
should have mitigated contagion effects, and actually protected institutions against negative
spill–overs from distressed banks respectively. In a

American Bankruptcy Case Study
Starting from the problems of failure to pay housing loans (subprime mortgage defaults) in the
United States (U.S.), then bubbled damaging crisis banking system not only in America but
expanded to Europe and to Asia. Successive causes a domino effect of the solvency and liquidity of
financial institutions in these countries, which among others led to the bankruptcy of hundreds of
banks, securities firms, mutual funds, pension funds and insurance. The crisis then spread to parts of
Asia, especially countries such as Japan, Korea, China, Singapore, Hong Kong, Malaysia, Thailand,
including Indonesia, which happens to have long had precious letters these companies.
Of the various criticisms of the experts, that the problem was triggered...show more content...
Lehman Brothers announced a gradual loss before bankruptcy. On June 16, 2008, the company
announced losses worth 2.8 billion U.S. dollars for the second half of 2008. Followed by a loss of
3.9 billion dollars in the third half of 2008 (September 10) and resulted in bankruptcy announcement
on September 15, 2008. A similar shock is almost the same experienced by Merryl Linch, Citigroup,
AIG and various other large financial institutions.
This reflects the weakening of the real sector with the bankruptcy of major U.S. companies like
General Motors, Ford, and Chrysler that threaten thousands of its employees work. Sure enough,
the U.S. unemployment rate reaches 6.7% increase in line with the increase in pessimism among
consumers and investors during the period September to November 2008. It is the job separation
rate (FLE) in the 34 largest last year. Recorded 533,000 employees laid off and reached a total of
1.91 million in 2008. (source: the U.S. labor department). Along with that, on November 30, 2008,
the U.S. government also announced a reduction in the value of real GDP for the part–III of 2008
by 0.3%.
Similarly also in Europe, the banking crisis in Europe was marked by problems at a small bank in the
UK, the Bank Northen Rock, in mid–2007. Northern Rock is a true small–scale private bank in the
UK. However, when there Gonjang–ganjing crisis in August 2007 and the bank became the
spotlight. Withdrawal of major funding by the client

Effects Of The Financial Crisis Of 2007-2008
Financial crisis of 2007–2008 is widely considered to be the worst financial crisis since the Great
Depression of 1930s. The origin of this big storm dated back to the high home prices of the United
States. After America's entire investment banking system was attacked, many industries such as auto
industry also went bankrupt. Unfortunately, it spread quickly to the whole world, causing huge
damages to the global economy. Therefore, my study will focus on the effects of thefinancial crisis
of 2007–2008. Not only the effects on advanced and developing countries, but also the effects that
can still be felt today. When it comes to global financing, one of the most important things is to
understand and learn to analyze different financial incidents. This ability can assist people who are
interested in finance or studying finance to comprehend current economic situation more deeply and
more detailedness. Financial crisis of 2007–2008 is a famous incident, and also a good example to
illustrate some troublesome problems that still exists today. Its effects on the global economy can be
very specific to today's economic situations. Some countries suffered a lot while some countries
survived from the big storm. As a result, interpreting the effects of financial crisis of 2007–2008 is
meaningful and educational to financial major learners and amateurs.
Background/Review of the literature "The 2007–2008 crisis started off in August 2007 as a subprime
mortgage crisis

The United States of America experienced one of its biggest financial crisis in history and it all
started in 2007 when the real estate market crashed. Real Estate prices began to collapse and early
delinquencies in underwritten subprime mortgages began to spike. The financial crisis continued up
to October 2008. The Federal Reserve and other organs of the United States government responded
by flooding the markets with money and other liquidity, reducing interest rates, providing
unprecedented assistance to major financial institutions, increasing government spending and taking
other steps to provide financial assistance to the markets in an attempt to revive it.
In 2007, when real estate prices began to collapse, investors started...show more content...
After the rescue of Fannie and Freddie, it seemed like it was more fuel being added to the
worldwide financial panic because other companies and institutions were still in crises. The Lehman
Brothers and AIG collapsed and Bank of America bought Merrill Lynch. (ibid.)
The Federal Reserved rescued AIG by exercising its emergency powers under section 13(3) for the
Federal Reserve Act, but Lehman was left with no one to rescue them. The terms of the rescue
were similar to that of Fannie and Freddie, "the government received senior preferred stock and
warrants, resulting in an immediate dilution of 80 per cent of common shareholder value and a
sharp drop in the value of junior preferred stock." The downside to this rescue was that AIG's senior
and subordinated debt soared and the counterparties on its credit default swaps, but other financial
contracts made out great. (ibid.)
After the collapse of AIG, the Treasury went back to congress again as they did with Fannie Mae
and Freddie Mac, but instead of asking for a blank check, this time around they asked Congress for
immediate authority to invest up to $700 billion US dollars in toxic mortgage and other assets in
order to clean up the balance sheets of the United States financial sector. This request was later
known as the 'Troubled Asset Relief Program' (TARP), while it was pending before Congress,
Washington Mutual, the largest

Marconi (2010) believes that the role played by the institutional investors propagated the financial
crises. Institutional investors, which is both, individual or companies do enjoy the benefits of
reduced commission preferential regulations. This is due to their large and professional investments.
Institutional investors like the mutual funds, pension funds, hedge funds like Magnetar Capital, and
Life insurance companies like the AIG and investments trusts contributed to the global financial
crises of 2007–2008. This financial crisis also referred to as the great recession was triggered by
liquidity problems in the United States economy. Many large financial institutions collapsed
according to Geczy (2010). The government had to bail out...show more content...
There were breaches in accounting practices and general breach of business ethics. The bank
directors and the chairman are accused of having certified false financial statements and not
disclosing key financial practices in the bank. Among the undisclosed practices was the Repo 105.
The Lehman had been using it from 2001, it involved using the Repos to finance assets and
treating them as sold Repos while accounting. This according to the report was abuse of ordinary
repurchase agreements, it was done to lower the banks leverage as was asked of investment banks
toward the end of 2007. The bank at times even involved its subsidiaries. Financial leverage should
have been attained by borrowing and investing the same at higher interest rates. The auditors Ernst
&Young have been accused of professional negligence for failing to disclose these practices thus
misled the investors on the financial status of the bank. Some critics cite the complex financial
systems and financial investment products to have been the trigger of the 2007–2008 financial
crises. According to Laurence (2010), other factors include: failure of effective regulations in the
investment markets, inappropriate credit interests, and self interest practices among the institutional
investors. According to Hughes (2011), some critics also argue that the institutional investors were
behaving in irrational manner

In 2016 it was estimated that the US wealth gap had reached a width previously seen in the 1920s.
Since the 1970s America's middle class has been shrinking, whilst the lower and upper classes
have been growing, the former at a much faster rate to than the latter. It's negative effects are best
stated up John Taylor in the Hover Digest: "On the Fraser index, the United States ranked 2 in the
year 2000 and it ranks 14 today. On the Heritage index it ranked 5 in 2008 and it ranks 12 today.
On the World Bank's Doing Business indicator it ranked 3 in 2008 and it ranks 7 today." (Hover
Digest 9). Much of this shrinkage has been attributed to various periods of economic turmoil in the
past several decades; the 1979 energy crisis, the Savings and...show more content...
Post–Great Depression deregulation began in 1980 when then President Jimmy Carter signed the
Depository Institutions Deregulation and Monetary Control Act into law. This was the first piece of
bank–reform legislation since the Great Depression. Among other things, the bill included provisions
lowering the Federal Reserve's mandatory reserve requirements for banks, preempted state usury
laws that limited interest rates lenders could charge for residential mortgages and allowed depository
institutions to access the Federal Reserve Discount Window for credit advances. In other words,
banks could borrow more of the taxpayers money, gamble with said money and states' attempts to
protect their citizens by regulating interest rates Banks charged for mortgages on homes. This
charity to large Banks was the first to come in a long line of endowments to corporate America
caused by the mushrooming of free market fundamentalism during the Reagan Administration that
has persisted to modern day. It is no coincidence that immediately following the birth semi–capitalist
largess was full of economic issues; deregulation led to irresponsible practices by During the 90s
deregulation continued to sowing the seeds of future downturn for the US economy as both major
parties shifted economically right. The paramount of deregulation from this

The Greek Financial Crisis Essay examples
The Greek Financial Crisis
Ever since the end of 2009, Greece has been involved in a financial and economic crisis that has
been record breaking and shattered world records in terms of its severity and worldwide effects. The
Greek government, since the beginning of the crisis, has attempted to take several governmental
measures to try and "stop the bleeding," including economy policy changes, dramatic government
spending and budget cuts and the implementation of new taxes for citizens. In addition to this, the
government has tried to alter the perceptions of Greek government and economy by the rest of the
world in an effort to appear both more liberal and more democratic. Greece has also been working
to privatize many previous...show more content...
As far as Greece's role in creating this crisis in the first place, it can be said that Greece is at fault
for a variety of reasons. The media has been focusing on the corrupt political system and
infrastructure, the lack of competition in the private sector, the wastefulness and inefficiency of the
public sector and a flawed tax system as causation for this mess. When the public sector was
expanded in the 1980's, Andreas Papandreou was given various agricultural subsidies and grants to
do with what he pleased. This enabled the funding of certain post–World War II groups to heal
political wounds and fund unions and other special interest groups to aid his political capital and
strength. The policies enacted in this decade allowed for the increase in power and funding of the
middle class by creating a vast amount of inefficient public sector government jobs for citizens. This
resulted in an increase in the levels of inefficiency, bureaucracy, corruption and wasteful spending
coupled with the increase in wages, pensions and benefits. This proceeded to drain through
government money and resources, and did not breed a culture of highly motivated, efficient and
effective government employees. A high amount of debts accumulated as the nation continued to
proceed in this way, using state money to subsidize failing businesses

The Federal Reserve acted in reaction to the financial crisis in many ways. First, the Federal
reserve decreased the federal funds rate to near zero to encourage inter bank lending. The Federal
reserve then performed perhaps one of its most important functions. It acted as the lender of last
resort to banks, including numerous innovative lending facilities. Through 2010 into 2014, the
federal reserve did something it hadn't done before. It enacted a quantitative easing program, in
which they made additional purchases into mortgage backed securities (since there were fewer
private buyers) and into government bonds (long term) in order to lower long term rates. That was
because at the time the economy was caught in a liquidity trap. Money...show more content...
While the monetary base did increase a lot due to the federal reserve's recession fighting monetary
policy, it was met with a much lower money multiplier because excess reserves ad depository
institutions increased drastically during the period(Mishkin). The American Recovery and
Reinvestment Act (ARRA) was passed in February of 2009. The Bill itself totaled in about $787
billion dollars. This piece of legislation entailed tax cuts, stat and local government aid, and an
increase in government spending. The pieces of fiscal policy such as ARRA can be given credit to
preventing a more severe financial crisis. Under an IS–LM framework, the increase in government
spending and the tax cuts (which lead to an increase in consumption) helped push the economy out
of the recession. The resulting policy helped prevent even worse declines in GDP and higher
unemployment rates had the government not acted otherwise. Blinder and Zandi highlight in "How
the Great Recession was Brought to an End" the unemployment rates with and without policy
response. They noted that, in 2010 the unemployment rate with policy response was 9.8%, whereas
without policy response it was forecasted to be 15.2%. One of the major aspect of the ARRA that
was distinct from TARP is that it was a stimulus bill aimed more at the American public rather than
Wall Street relief. The ARRA had seven components to it that were all intended to increase output,
and decrease unemployment (Amadeo). The first component

2007-2008 Financial Crisis Essay
The financial crisis of 2007–2008 was one of the worst economic downturns the United States has
faced since the Great Depression of the 1930s. It affected the banking industry by causing banks to
squander money on mortgage defaults, bringing interbank lending to halt, as well as affecting credit
being provided to consumers. Another effect was that it caused certain businesses to essentially run
out or come to an end. Many companies had to take advantage of bailouts, but the economic was
still in disarray. The financial crisis also affected the country in the long–term by bringing about new
regulatory programs such as Dodd–Frank Wall Street Reform and Consumer Protection Act (Singh,
2015).
Before the beginning of the financial crisis in 2007, rules and policies passed in the United States
had required the banking sector to allow more consumers to be able buy homes (Nielsen, 2008).
Starting in the year 2004, the bursting of the housing bubble took place, when Freddie Mac and
Fannie Mae, two of the largest and most well–known mortgage lenders in the United States, obtained
a large quantity of mortgage assets, including some chancy mortgages. They charged substantial fees
and accepted lofty margins from these subprime mortgages. The mortgages were used as safety or
security for getting private label mortgage–based...show more content...
TARP stands for Troubled Assets Relief Program. It is a safety net put in place by the United
States Congress and was originally worth approximately $700 billion. It was signed into law in
October of 2008 by then–President, George Bush. TARP basically allows the United States
government to purchase assets and equity from financial institutions to strengthen its financial
sector. The Dodd–Frank Wall Street Reform and Consumer Protection Act reduced the amount from
$700 billion to $475 billion. Then, on October 11, 2012, the Congressional Budget Office stated that
total disbursements would be $431

The 2008 Financial Crisis Essay
Introduction
In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing
market; moreover, it is considered by many economists as one of the worst recession since the Great
Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to
Europe and the rest of the world. It brought governments down, ruined economies, crumble financial
corporations and impoverish individual lives. For example, the financial crisis has resulted in the
collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and
AIG. These collapses not only influence own countries but also international area. Hence, the
intervention of governments by changing and...show more content...
The economy is known as a new emerging economy especially after entering WTO in 2007. The
Foreign Direct Investment (FDI) has increase considerably and the GDP is over 8% in the period of
three years (2005–2007). Nonetheless, it is clear that the economic instability occurs after WTO
accession of Vietnam 1 year. Consequently, the economy has suffered surginginflation as well as
trade and fiscal deficit. (Figure 1) GDPCPI
20058.48.3
20068.27.5
20078.58.3
20086.223
20095.36.9
Figure 1 : GDP and CPI 2005–2009 (% change per year)
Source: Asian Development Bank and Vietnam
B. Inflation
Inflation doubled in 2007 and reached a peak at 28% in 2008.The fiscal make up 4–5% GDP and the
trade deficit accounted for 20% GDP in which approximately $US17.5 billion dollars. The influence
of high fuel combine with food prices and high domestic demand lead to high inflation. The high
price of fuel in Vietnam illustrates global fuel prices and the high domestic demand of country
importing fuel. Furthermore, the increase in global food prices affect detrimental to the high
inflation in Vietnam.(Figure 2) Figure 2 : Fiscal Deficit and Trade Deficit (2003–2008)
Source : IMF, General Statistics Office of Vietnam
C.Impact on Trade
The global financial crisis has affected severely on Vietnamese exports. After joining the WTO,
Vietnam's trade has become depend on global

The Global Financial Crisis Essay
1.Introduction
1.1.Background
The Financial crisis was triggered in 2006 when US housing market began to crumble as the housing
price reached their highest point after years of speculative price increase; many house owners
defaulted on their loans, particularly subprime mortgagers (Archarya et al., 2009). Starting in
mid–2007, the outburst of US housing bubble in the subprime mortgage leads to the global financial
crisis that has been often so called 'Great Recession' (Verick and Islam, 2010).
Archarya et al. (2009) states that it is widely agreed that the fundamental cause of this global
financial crisis was the credit boom and the housing bubble. While Poole (2010) argued that it is a
mistake to only take subprime mortgage issue...show more content...
2.Impact of Recession on Customer Behaviour
The financial crisis and economic recession of 2008 unevenly affected economic aspect of countries,
industries and extended into social aspects, which include how the public responded to the
recessionary circumstances surrounding it (Gangl et al., 2012). This chapter focus to understand
how the current economic depression shapes the customers behaviour.
Earlier research by Desvaux et al. (2009) found that the recession had led to lower consumer
confidence, lower income due to high unemployment rate, higher living cost because of inflation,
lower wealth due to shrinking in household wealth and restricted consumer credit as bank cut
lending to consumer. The above five factors have shaped consumer behaviour in responding to the
recession as follows (Desvaux et al., 2009):
Control spending: this is the most common reaction during recession; people would have their own
budgets to reduce their overall spending such as eating out and travel plans.
Replace only when needed: consumers were willing to delay their new purchases of cars or
electronics and extend the lifetime of the current assets.
Shop smarter: people have begun to look out for promotions and special bargains, or use internet to
find better or lower price.
In addition to the above behaviours in responding to the

Financial Crisis Essay

Recommended

Recommended

More Related Content

More from College Paper Writing Service Reviews

More from College Paper Writing Service Reviews (20)

Recently uploaded

Recently uploaded (20)

Financial Crisis Essay