This website uses cookies to ensure you have the best experience. Learn more

Financial Crisis Of 2008 Essay

2303 words - 9 pages

The Financial Crisis of 2008 was the worst financial crisis since the Great Depression, however a lot of American’s want tougher law of be enforced against executives and companies they think started the mess (Jost/Misconduct). Civil charges have been brought up against major banks for misleading investors, but a federal judge rejected a proposed settlement saying it was too lenient (Jost/Misconduct). The flood of subprime mortgages roiling the housing market in the U.S. is also causing the worldwide credit crisis (Jost/Crisis). Investment banks everywhere are taking billion-dollar losses, forcing them to revalue their belongings (Jost/crisis). This crisis started under the surface for many years then emerged into the public in March 2008 when cash-strapped Bears Steams were being forced to sale to JP Morgan Chase; they did this for a worthless $2 a share (Jost/Misconduct). The Financial Crisis happened because of these 5 things; systemic risk, too big to fail banks, payment systems, credit rating agencies, and hedge funds.
Systemic Risk
What is this?
Systemic Risk is a risk that triggers an event, for example, the failure of a large financial firm. This can and most likely will seriously harm the broader economy and impair financial markets (Bullard). In finance, component or groups of a system can be contained and not harm the entire system (Bullard). There are systemic concerns that prompted U.S. Department of the Treasury and the Federal Reserve to act to prevent several large firms to go into bankruptcy (Bullard). The economy could benefit from reforms that are reducing systemic risks, for example creation of an improved regime that would solve failures of big financial firms (Bullard).
Involvement of Government
The informational asymmetries of commercial banking and the contagion risk proper of the dullness have justified the growth of strong safety nets, guarantees, and government involvement in critical situations (Lagos). These realities require outstanding moral integrity, political independence with their heads, and top-level technical expertise (Lagos). One way the government looks at this financial crisis is just a symptom of a deeper crisis which is a crisis of its own.
• The growing executive compensation
• Manager’s capitalism has replaced owner’s capitalism
• The failure of gatekeepers , this includes boards of directors, career politicians, auditors, and Wall Street analysts
• The management of earnings
These are the Bogle cities particular issues that caused the financial crisis. Mark Roeder, a former executive at the UBS, conducted an analysis that suggested that large-scaled momentum “played a pivotal role” in the global financial crisis, also known as the financial crisis of 2008 (Lagos).

Involvement of Private Sector
The Reserve Bank has been verbal that they are uncomfortable about wealthy Asian governments using savings when they use the savings to shop around for assets (Saulwick). High levels of public sector...

Find Another Essay On Financial Crisis of 2008

The 2008 Financial Crisis Essay

1206 words - 5 pages Introduction The current financial crisis happened on 2008 and lasted for quite a while. It caused different levels of economic recessions in varying regions all over the world. Government officials of financial institutions and economists try to rectify the financial mistakes and lower the risk of future financial crisis. This essay will take United Kingdom financial system for instance, analysis its financial regulations. Firstly, it gives

2008 financial crisis Essay

2981 words - 12 pages Burak Çetin MSc International Business IBS, Budapest 8 November , 2014 2008 Financial Crisis Bank failures, billions of dollars soared, global growth lowered, impotent governments. Financial capitalism is in crisis.Media loop line numbers of the crisis, the stock market falls, the huge losses of some banks without necessarily really explain What is happening in simple terms. But what are the reasons of the global financial crisis? . And

The 2008 Financial Crisis

2612 words - 11 pages The 2008 financial crisis witnessed how fragile financial institutions and the whole financial system could be. In the U.S., lots of banks touched the edge of failure, requiring extensive assistance from the government. Some received bailouts in forms of capital injection or loss sharing agreement, while others entered shotgun marriage with healthier financial institutions arranged by Federal Deposit Insurance Corporation (FDIC). Among banks

Factors That Influenced the Global Financial Crisis of 2008

631 words - 3 pages Since the years of the great depression in the 1930s, the global financial crisis of 2008 is arguably the worst to have hit the world. The crisis began with the escalation of prices in the property market creating a liquidity crisis. It had massive consequences in varying sectors of the economy. The financial, property and mortgage sectors were hit hard by the crisis. Large financial institutions collapsed while stock markets experienced

Awareness of Risk during the 2008 Financial Crisis

2210 words - 9 pages will try to illustrate the hidden effects of human behaviours on awareness of risk during 2008 financial crisis. Admittedly, however, plausibility still exists in partial improvements beforehand. 2008 Financial Crisis seemed to come out of blue and shocked the whole world in the first place but was soon concluded by experts as a consequence of systemic risk. (Federal Reserve Bank of Atlanta, 2009) Characterizing such a risk are three consequences

The Financial Crisis of 2007-2008 and The Federal Reserve

3067 words - 13 pages Did the monetary policy of the Federal Reserve lead the financial crisis of 2007-2008? Outline Introduction Literature review and critical discussion -1. How could the Federal Reserve prevent and solve financial crisis? – The function of Federal Reserve. -2. The background of the financial crisis.—what kind of monetary policy the federal reserve made? -3. The defending for the low interest policy. -4. The against to the monetary policy

The Bank of England and The 2008 Financial Crisis

766 words - 4 pages Due to the 2008 financial crisis, the Bank of England employed quantitative easing (an unconventional monetary policy used to stimulate the economy) by cutting interest rates down to 0.5 % and has been keeping it until now. The Bank made the decision to keep QE and the interest rate unchanged in March. Spare capacity (the ability of a firm to produce more of a product than is now being produced) is used by the BoE to justify its use of forward

Chinese Administration response to 2008 financial crisis

975 words - 4 pages Commodity boom, housing bubble, global imbalances, a subprime mortgage crisis and inflation led to the 2008 macroeconomic crisis and China's economy suffered, especially its exports industry (Yu, 2009; Zhang, 2009; Zhang, Li & Shi, 2009) . Its pre-crisis stable fiscal policy and tight monetary policy were substituted with expansionary policies. (Yang, 2011; Yu, 2009; Zhang, Tang & Lin; Zhang, Li & Shi, 2009). A fiscal package of 4

2008 Financial Crisis: Iceland’s Then & Now

2556 words - 11 pages I) Causes of the Crisis On September 15, 2008, the American bank Lehman Brothers, with holdings over 600 billion USD, filed bankruptcy. This was by far the biggest bankruptcy in U.S history and it marked the beginning and the largest financial crisis ever. How can one of the biggest banks in the world fail? How can a bankruptcy in US make someone on the other side of the world unemployed? The answer is Collateralized Debt Obligations (CDOs

2008 Financial Crisis: Iceland’s Then & Now

1548 words - 7 pages lower emigration rates, and reach out to the international community for support in case of potential troughs. The financial and economic meltdown has given Icelanders the chance to rethink their actions and prioritize their duties, which underline the reason to why it should transform internally, revolutionizing the community and restoring the economy sustainably. Works Cited BBC (2012) “Trial of Iceland ex-PM Haarde over 2008 crisis

2008-2011 Financial crisis in Iceland

1588 words - 7 pages Introduction: The 2008 financial crisis was one of the major economic and political events in Iceland. Iceland suffered major financial meltdown when all three of the country’s major privately owned banks collapsed as a result of difficulties in refinancing their short-term debt and run on deposits both in and outside of the country. Taking in consideration the size of Iceland’s economy and its population, this crisis was classified as the

Similar Essays

Causes Of The 2008 Financial Crisis

972 words - 4 pages Financial crisis The financial crisis occurred in 2008, where the world economy experienced the most dangerous crisis ever since the Great Depression of the 1930s. It started in 2007 when the home prices in the U.S. Dropped significantly, spreading very quickly, initially to the financial sector of the U.S. and subsequently to the financial markets in other countries. The victims in the United States were: the largest commercial banks, the

Awareness Of Risk And 2008 Financial Crisis

2322 words - 10 pages understanding the situation afterwards. Though from a scientific perspective, improvements could be made by modifying quantitative models, behavioural obstacles deeply-rooted in such a process constrain its effectiveness. The rest of the passage will try to illustrate the hidden effects of human behaviours on awareness of risk during 2008 financial crisis. This catastrophe emphasizes again that though objective analysis and technical refinements could

The Never Ending Financial Crisis Of 2008

762 words - 4 pages something is not working, go back to the drawing board and try again. Maybe this economic recession needs a little help from the “invisible hand.” Works Cited Colander, David. Macroeconomics 9th Edition. The McGraw-Hill Companies, Inc., 2013. Putnam, Robert D. Crumbling American Dreams. New York Times, Late Edition, 2013. Sum, et, al. How Are We Doing?: The Great Recession of 2008-2009 and the Blue-Collar Depression. M.E. Sharpe Inc., 2010. Wisman, Jon D. Wage Stagnation, rising inequality and the financial crisis of 2008. Cambridge Journal of Economics, 2013.

The 2008 Financial Crisis Essay

1529 words - 6 pages introduction 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