What Caused The Financial Crisis? Essay -- Economics

The roots of the pecuniary crisis can be traced adventure to the property asset bubble in the US between 1997 and 2006. This asset bubble was enabled by a poorly regulated subprime mortgage attention and the assumption that property prices would continue to rise. The collapse of the property bubble and incidental foreclosures led to many financial institutions suffering huge losses due(p) to their exposure to the subprime market through a series of innovative and difficult investment vehicles. While these investments carried extra risk, they also gave the opportunity for massive concisely term returns, and the move to these riskier and more complicated financial investments may draw been facilitated by a too big to fail mentality by many US financial institutions.The collapse of the property bubble and hesitancy in the markets led to a run by depositors and a fulminant loss of funding for banks twenty-four hours to day activities. Due to the dependence of the interbank m odify market for short term funding, these banks were unable to fund their day to day operations and some collapses, (Lehman Brothers) while others were bailed out by the US governing body (AIG). Such a loss of confidence within the financial exertion eventually led to banks operating a more cautious uprise to lending and ensured a severe reduction in the availability of credit, two to other banks and consumers. I will look at the how subprime lending, assisted by expansionary macroeconomic policies and lenient regulatory supervision, eventually morphed into a full financial crisis rather than the view that such crises are cyclical in bluff market economies and are part of the boom and bust characteristics of capitalism. Sub-prime Mortgages and the Building Blocks of the fiscal Crisis... ...pubs/ft/fandd/2008/06/dodd.htmCarmassi, J, Gros, P and Micossi, S. The Global Financial Crisis Causes and Cures. ledger of Common mart Studies. Vol.47, No.5, pp. 977-996, 2009.Available a thttp//www.relooney.info/SI_FAO-Asia/Global-Crisis_23.pdfBlakenburg, S and Palma, J.G. Introduction the global financial crisis. Cambridge Journal of Economics. Vol.33, pp.531-539, 2009.Available athttp//cje.oxfordjournals.org/content/33/4/531.full.pdf+htmlOnline PublicationsInman, P. on the loose(p) money hits home with lenders facing 250bn losses. The Guardian Online, July 10th, 2007.Available athttp//www.guardian.co.uk/ billet/2007/jul/10/usnews.internationalnews1?INTCMP=SRCHBaldwin, R. Excessive risk-taking by Banks. Wall Street Pit. Global securities industry Insight, April 9th, 2012.Available athttp//wallstreetpit.com/90959-excessive-risk-taking-by-banks