financial crisis

1. Financial crisis of 2008
PRESENTED BY: QURATULAIN
ROLL NO: 2K15/05

2. What was the reason of financial crisis in
2008?
 The financial crisis started in united states, from 2007 to
2008 . There are many reasons why economists think
the crisis happened. Most economists believe that it
started From 1997 until 2006, people bought expensive
house, even though they did not have enough money
for it. Economist Milton Friedman said that the Great
Depression was worsened because the Federal Reserve
printed out less money than usual.

3.  Since the money had come from other countries, it
was easy to have good credit. People used this
credit for expensive home loans. This created an
economic bubble which caused the houses' prices
to raise. Because they had a lot of money, the
loaning companies made it easier to get a loan,
even if the borrower didn't have a good credit
history. These loans are known as subprime loans

4. Targeting industries behind American
financial crisis?
 The targeting industries which include in, Lehman
Brothers went bankrupt. Merrill Lynch, AIG, Freddie
Mac, Fannie Mae , Royal Bank of Scotland, Bradford
& Bingley, Fortis, Hypo and Alliance & Leicester all
came within a whisker of doing so and had to be
rescued.

5. What were the main default of financial
crisis?
 It was securitization. Or greed. Or deregulation. Or any
number of other things that, truth be told, probably did
play a role in the unusually severe economic downturn.
Securitization: Securitization is the process of taking
an illiquid asset, or group of assets, and through
financial engineering, transforming them into a security.

6.  For example : is a mortgage-backed security (MBS), which is
a type of asset-backed security that is secured by a collection
of mortgage.
 Greed: greed is usually described as an irresistible craving to possess
more of something (money, material goods) than one actually needs.
 Deregulation: deregulation is the reduction or elimination of
government power in a particular industry, usually enacted to create
more competition within the industry.

7. Impact of financial crisis on the world
banking sector?
The financial crisis affected the banking sector by causing
banks to lose money on mortgage defaults, interbank lending
to freeze, and credit to consumers and businesses to dry up.
For the much longer term, the financial crisis impacted banking
by spawning new regulatory actions internationally through
Basel III and in the United States through the Dodd-Frank Wall
Street Reform and Consumer Protection Act.

8.  When increasing numbers of U.S. consumers
defaulted on their mortgage loans, U.S. banks lost
money on the loans, and so did banks in other
countries. Banks stopped lending to each other, and
it became tougher for consumers and businesses to
get credit. Meanwhile, the ultimate impact of the
financial crisis keeps unfolding.

9. Difference between regulated and
deregulated banking system how they
work?
 Regulation: Regulation refers to controlling business through
laws passed by the government. To protect the interests of
consumers, government institutes regulatory laws.
 Deregulation: deregulation deals with the elimination of
government laws and rules. These laws, or removal of them,
impact consumer and business activities such as obtaining
loans, importing supplies and selling products

10. Is Pakistan system is regulated or
deregulated yes or not?
The Pakistan system system is regulated
in which higher authorties regulated
according the law of Pakistan.

11. Discuss the impact of financial crisis on
Pakistan investment banks?
 “the Pakistani banking system has, over the last decade,
gradually evolved from a weak state-owned to a slightly
improved and active private sector motivated system. But as
of end 2008, data from the banking sector confirms a slow
down. As of October 2008, total deposits fell from Rs 3.77
trillion in September to Rs 3.67 trillion. Provisions for losses
over the same period went up from Rs 173 billion in
September to Rs178.9 billion in October.

12.  The global crisis has really fuel to the fire. There was a time
window earlier this year to address all this, and we missed it.”
The drying up of credit internationally has hit Pakistan hard
with the banking system suffering a severe liquidity problem.
Overnight call rates rises so much and its ranging from 32 to
40 percentage.