Causes for the Financial Crisis of 2008 - 889 Words

The financial crisis in 2008 was been considered as the worst financial crisis since the Great Depression. One of the major reasons of the crisis was that banks in the States were given permission by the repeal of the Glass-Steagall legislation, which allowed banks to affiliate with insurance, real estate, security. The goal was to create financial firms â€Å"better equipped to compete in global financial markets†. With the firewall between commercial banks, which make loans and take deposits, and investment banks, which underwrite securities removed, an opportunity rise for banks to create and push more money and eventually to speculate on financial markets. The financial crisis reminded us that the banking industry has a serious influence†¦show more content†¦The Financial Services Act has allowed The Bank of England to supervise banks in the United Kingdom and intervene if they see any financial activity not consistent with their objectives. They will also regula te the insurance industry through the Prudential Regulation Authority; which will increase confidence in the community by letting them know that they can use these financial services; getting access to money through banks and knowing that their belongings are insured by these firms and putting a stop to speculation. The future of the banking industry looks more sound and secure with new regulations such as the Dodd–Frank Wall Street Reform and Consumer Protection Act in the United States and The Financial Services Act in the United Kingdom. Banks now have to pay annual tax from their balance sheets. The government hopes this will discourage banks to do risky financial activities and since the financial crisis began in banking, banks should help the economy recover. These legislations aim to put a stop to the impression that whatever banks do without any consequence they will be bailed out by the government and encourage banks to be more responsible in their financial activit ies. It is important to understand that theseShow MoreRelatedCauses of the 2008 Financial Crisis2661 Words   |  11 PagesCourse Title Date of Submission Causes of the 2008 Financial Crisis a) Financial crisis definition Financial crisis is defined as the financial meltdown, or in other terms as the credit crunch. A financial crisis is an economic incidence makes it hard to obtain and access the capital for use in investment. The economic crisis is an ongoing economic problem that was more pronounced in 2008 resulting in the liquidity in the global credit markets and its financial systems (Berlatsky 77). This meansRead MoreCause Of The 2008 Financial Crisis1754 Words   |  8 PagesCauses of the 2008 financial crisis Financial crisis has been prevalent since time immemorial. The world’s economies have been continually hit by the same and the 2008 financial crisis is definitely not the last appearance. The financial sector involves complexity and contains one of the world’s largest players and has continually developed into large conglomerates sometimes too big to control. These financial organizations have developed products that have become hard to regulate and impose controlRead MoreThe Causes of the 2008 Financial Crisis621 Words   |  2 PagesReason #1. The 2008 economic downturn was affected by the housing market and specifically the defaulted loan percentage. Davis (2008) claimed Most of the sub-prime loans have been made to borrowers with poor credit ratings, no down payment on the home financed, and/or no verification of income or assets (Alt-As). Close to 25% of sub-prime and Alt-As loans are in default. It seemed in the events leading up to the housing market crash were marred with irresponsible investors who took very littleRead MoreThe Causes and Consequences of the Financial Crisis of 20082496 Words   |  10 PagesEnglish Dossier Milà ©na Gandroz 2A Cycle ICM What are the causes and the consequences of the global financial crisis of 2008? SOMMAIRE INTRODUCTION 3 WHY IT HAPPENED? 4 1. Deregulation policy 4 2. Securitization of mortgages 4 HOW IT HAPPENED? 6 1. The subprime crisis 6 2. The financial crisis 6 WHAT ARE THE CONSEQUENCES? 7 1. In the financial sector 7 2. In the United States 8 3. Abroad 8 WHAT IS HAPPENING NOW? 8 1. Some things are changing 8 Read MoreCauses of the Financial Crisis of 2008-20091736 Words   |  7 PagesCauses of The Financial Crisis of 2007-2009 According to our financial textbook â€Å" Financial crises are major disruptions in financial markets characterized by sharp declines in asset prices and firm failures† (Mishkin and Eakins 2012). In August 2007, defaults in mortgage market for subprime borrowers sent a shudder through the financial markets, leading to the worst U.S financial crisis since the Great Depression. Alan Greenspan, chairman of the Fed, described the financial crisis as a â€Å"once-in-a-centuryRead MoreCauses Of 2008 Financial Crisis : Imprudent Mortgage Lending912 Words   |  4 PagesCauses of 2008 financial crisis: Imprudent mortgage lending In this essay, imprudent mortgage lending is considered as a main factor, which caused the 2008 financial crisis. It mainly discusses the cause of imprudent mortgage lending and regular changes. And at last, there are some suggestions proposed for mortgage lending’s future development. A famous global bank called Lehman Brothers nearly knocked down the international financial system in September 2008. It was an unexpected collapse, whichRead MoreThe 2007-2008 Financial Crisis: Causes, Impacts and the Need for New Regulations1563 Words   |  7 PagesTHE 2007-2008 FINANCIAL CRISIS: CAUSES, IMPACTS AND THE NEED FOR NEW REGULATIONS The initial cause of the financial turbulence is attributed to the U.S. sub-prime residential mortgage market. The sustained rise in asset prices, particularly house prices, on the back of excessively accommodative monetary policy and lax lending standards during 2002-2006, increased innovation in the new financial instruments, unusual low interest rates resulted in a large rise in mortgage credit to households; particularlyRead MoreDeregulation Is The Underlying Cause Of The 2007 / 08 Financial Crisis1382 Words   |  6 Pagesderivatives. The Financial crisis in 2007-2008 brought the massive hurt to everyone in the world. The worldwide financial problem affected thirty million people loosing their jobs and cause many countries getting close to go bankrupt (Peah, 2014). This is the global issue that everyone should be consider of. The purpose of this essay is to determine if the deregulation was the underlying cause of the 2007/08 financial crisis. The essay argues the deregulation was the underlying cause of the 2007/08Read MoreThe Financial And Political Systems Have Always Played1226 Words   |  5 PagesThe financial and political systems have always played a major role in stabilizing the society and ensuring a smooth transition between public policies and economic activities. Over the past decades, we’ve witnessed the global crisis of 2008, which costs â€Å"tens of millions of people their savings, their jobs, and their homes†. Interestingly, the root of the problem comes from the corruption of the financial industry and how the political figures respond to the crisis. This response paper correspondsRead MoreThe 2008 Financial Crisis Essay1326 Words   |  6 Pagesintroduction The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking (Zandi, 2008). Additionally, expert analysis on the 2008 financial crisis assert that the cause was also due to erroneous monetary policy moves and poor housing policies. The federal government