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

Repercussions Of The Financial Crisis Essay

960 words - 4 pages

The most important thing on many people’s minds now are probably the financial crisis that is occurring. Due to its enormity, the effects, like the companies firing employees to cut costs, can be felt all around the world. As the repercussions are huge, so we must be well prepared.

However, before I go on to the repercussions of the financial crisis, it is essential to know why it occurred. The roots of the crisis can be traced back to the previous years, where the economy was prospering. The Republicans, who were in charge then, overestimated the market’s ability to self-correct. They believed that the lesser government intervention the better, as the market could regulate itself better than the government could. However, an economy needs some discipline, regulation, and oversight too.

Alan Greenspan, who was then the Chairman of the Federal Reserve, had consistently advocated for the “loosening of regulations.” At the end of the ‘90s, when financial derivatives had just begun to take off in the United States, some pointed out that they lacked transparency, and that they should be more strictly regulated. Greenspan, abusing his authority, remained firmly opposed to regulation, believing that it would hurt the economy.

Under this laissez-faire policy, greed and corruption on Wall Street created a growing bubble, eventually leading to the current crisis.

The government encouraged house ownership. Houses were selling like hot cakes. The bankers, in a bid to attract more loans to be taken, further decreased the already-low interest rates for loans. This way, they could earn more money. In short, greed was the start of this whole financial crisis. The greedy bankers wanted more profit, so they did not consider the financial ability of the people who loaned the money.

Many people were lured by their offers and took up loans that they could not afford to pay. When they could not pay, the houses were taken back by the banks. At first, when the economy was good, people clamored to buy houses. After some time, the housing sales went down, so the houses could not be sold. As a result, the houses quickly devalued and the banks lost money. Most of their assets were stuck by these properties. When these properties were sold, the money that the banks got back was not enough to cover up for the amount they lent out. This results in a bad loan. Because the loan is huge, the banks lose a great amount of money.

You may think that the banks will eventually sell the houses for money, so they will not run out of money even if they make a loss. You have forgotten one important aspect of banks. Where do they get their money from? The people who deposit the money in the banks, right? Hence, if they wanted to withdraw a large sum of money, the bank would not be able to...

Find Another Essay On Repercussions of the Financial Crisis

The never-ending financial crisis of 2008

762 words - 4 pages decades the U.S. has been subject to “[an] economic and cultural [entanglement] a mixture of government, private sector, community and personal failings” (Putnam 2013, III). Putnam believes that this financial crisis occurred as a result of layoffs, and many closings of businesses (Putnam 2013, 2). We can further this understanding by turning to Sum, et. al., who believed that the crisis occurred due to the blue-collar workers who have lost

The Background of Asian financial Crisis

5724 words - 23 pages Financial Management. The reasons for my chose are because I am interest in these topics, and I am very little understanding of the financial crisis, I want to know more about the Asian financial crisis in 1997. Also it is relative with my subject; these topics are full of challenges, temptations and knowledge. In addition, it is relevant my future career, know more about it is good for my future job.The aims of this report are through the research

An Overview of the Argentine Financial Crisis

1929 words - 8 pages The financial crisis in Argentina during the late 1990s and early 2000s resulted in severe issues with foreign debt, inflation, unemployment, and political turmoil for the country. Argentina not only suffered a currency crisis, but also suffered a political crisis. Fallout from the economic collapse was so severe the Argentinean population resorted to civil unrest and protest, which in turn exacerbated Argentina’s problems at the turn of the

Financial Crisis of 2008

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

Project Of Financial Crisis

1944 words - 8 pages elections 14U.S. Government to Invest in Banks to Boost Confidence 15U.S. government policies in the subprime mortgage crisis 18Conclusion 20Appendices 21Work Contribution AcknowledgmentsIt has been the worst financial crisis since the Great Depression of the 1930s. It contributed to the failure of key business, declines in consumer wealth of trillions of dollars and a significant decline in economic activity.The crisis can be linked back to the

The 2008 Financial Crisis

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

The Argentine Financial Crisis

2460 words - 10 pages period was marred with rampant inflation rates and job loss, scenes of malnutrition among youth, and families scouring for anything that could be sold, such as cardboard, glass, and metal. Many of us are aware of the Argentine financial crisis, and understand little of what it was about. What most people tend not to know is precisely what caused the incident, what has happened in South America since 2001, and how it has affected the global community

The 2008 Financial Crisis

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

The Current Financial Crisis

856 words - 3 pages creating growth. When people lose confidence in the economy this activity freezes or weakens, consequently, asset prices decline, unemployment rises and companies default as was the case of Lehman Brothers in 2008. The freezing of the flow of money is a financial crisis. Today, the global flow of money is at risk. This risk is a result of Debt and Credit imbalances: "Persistent trade surpluses in some countries and deficits in others did not

The Global Financial Crisis

1000 words - 4 pages The global financial crisis has brought wide-ranging changes to consumer spending behaviour and consumption patterns throughout the world with the economic downturn impacting on the spending and purchasing power of people. The findings of a study conducted by Booz and Company in 2008 on consumer spending behaviour revealed that, firstly, the unprecedented confluence of the dramatic rise in oil prices, the substantial deterioration of housing

The Global Financial Crisis

618 words - 2 pages the worst financial crisis since the Great Depression of 1930. Called “Occupy Wall Street”, the movement drew the attention of the media the world over. But what are the causes of the global financial crisis? How did we, or our governments, let it happen? The protesters seem to have found an answer. They blame but one thing: greed. According to protesters in London, it is the fault of the banking industry. Worse yet they blame their government

Similar Essays

Financial Crisis Of The 1980s Essay

1094 words - 4 pages The financial crisis of 2008 and 2009 is considered by others as the worst financial crisis since the Great depression of 1930. However there were other financial crisis which had happened after the Great depression which were equally disastrous. The one that comes in mind was the financial crisis of the 1980s and early 1990s. It is always overlook by others because of the 2008 credit crunch which happens to be the recent one. It became known

What Were The Repercussions Of President Kennedy And His Executive Committees Decisions Made During The Cuban Missile Crisis?

2074 words - 9 pages What were the repercussions of President Kennedy and his Executive Committees decisions made during the Cuban Missile Crisis? A. Plan of the Investigation This investigation will be an evaluation of President Kennedy’s Executive Committee and the repercussions of the decisions made during the thirteen days of the Cuban Missile Crisis. Tape recordings and files had been deemed classified, but these files are now released and the decisions

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

Causes Of The Asian Financial Crisis

1302 words - 5 pages Introduction:There appears to be many theories and proclaimed reasons for the Asian financial crisis, which I guess is to be expected in a topic which is predominately to do with economics. So instead of going through each and every one of these theories, I will take a view of what I can see as a creditable and logical explanation of why the Asian financial crisis occurred.Leading up to the Asian Financial Crisis, the Asian region accounted for