StudentShare solutions
Triangle menu
  • Home
  • Subjects
  • Business
  • The Financial Crisis Of 2007-2010: Was It Simply The Result Of Lax Regulation, Or Were A Range Of Factors At Play

The Financial Crisis Of 2007-2010: Was It Simply The Result Of Lax Regulation, Or Were A Range Of Factors At Play - Essay Example

Nobody downloaded yet

Extract of sample
The Financial Crisis Of 2007-2010: Was It Simply The Result Of Lax Regulation, Or Were A Range Of Factors At Play

The closure of business functions resulted in unemployment. This shattered the trust of the businesses on the economy and specifically the financial institutions that actually drove the boom. The recession gave a very wrong impact to the consumers. The effects of the financial crisis can still be prominently seen on the global economies’ resisting to take up growth. The intensity of the financial crisis was very high. The seriousness of the impact can be noted from the fact that due to the financial crisis around 4000 banks in the US collapsed (Mike, 2013). The topics of the financial crisis have been discussed on a regular basis in many academics, business and institutional forums. Therefore, topic of the underlying debate has also been concerned to focus on the factors which resulted in the financial crisis. DISCUSSION OF REASONS OF THE FINANCIAL CRISIS World Bank reported that entire episode of financial crisis as a series of three event including the US sub-prime mortgage loans, followed by the bankruptcy of US investment giant Lehman Brothers (Baba & Packer, 2009) and final phase of the episode came to the picture as economic recession hitting hard to the developed economies than developing ones (Mike, 2013). To date, the recession is still resisting the recovery; therefore, in order to strengthen recovery it is important to assess the factors of failures. Tax System Implications and Bad Policies The implications of the tax system on the financial crisis plays very important role. The tax burden on the individuals is determined by the tax rates. The variation in the amount of taxes paid by the companies and by the individuals in any economy play a very vital role in determining the effectiveness of the implementation of the tax in that particular economy. Taxes along with being source of revenue from for the public finance also forms the core reason of business’s debt orientation. Since debt capital rising provides tax benefit therefore, business in order to take tax benefit attempt to take excessive debt. Further, in referred debt orientation to take tax benefit businesses sometime ignore the rising bankruptcy cost that rises in proportion to the debt; hence, increasing the chance of crisis with excessive debt (de Mooij, Keen, and Orihara, 2013) The relationship has also been asserted in the IMF report with two different models both having positive relationship as presented below (de Mooij, Keen, and Orihara, 2013): (de Mooij, Keen, and Orihara, 2013) Some researcher, in contrast, hold view that crisis has been caused from the bad policies and tax factor shall not be held responsible for it. For instance, Peter J. Wallison has presented a detailed discussion in the book entitled “Bad History, Worse Policy’ on the financial crisis of 2008. The author debated in specific reference to Dodd-Frank act, housing policy and other policies from the government that was unable to regulate the market in true spirits and hence the fragile economy collapsed. Complex Structured Financial Products Financial product increasingly took over the market as the financial market managed to take over the reins of the economy. Many financial products were complex in nature. New methods had been brought up by the banks and the financial institutes to promote more loans. Product innovations such as financial derivatives are given special responsibility for the crisis. Increased resort of the financial system to innovate ...Show more

Summary

THE FINANCIAL CRISIS OF 2007-2010; WAS IT SIMPLY THE RESULT OF LAX REGULATION, OR WERE A RANGE OF FACTORS AT PLAY? INTRODUCTION The financial crisis of 2007-2010 had its first interaction with the US economy in 2007. This crisis started from the US and then spread around the whole world…
Author : orinnitzsche
The Financial Crisis Of 2007-2010: Was It Simply The Result Of Lax Regulation, Or Were A Range Of Factors At Play essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"The Financial Crisis Of 2007-2010: Was It Simply The Result Of Lax Regulation, Or Were A Range Of Factors At Play"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

International Business Analysis. Financial Crisis of 2007-2010. Bankruptcy of Lehman Brothers
In the year 2007, numerous important and prominent banks both in Europe and in the United States (US) witnessed a sharp decline with regard to their respective securities which were mortgage-backed in nature. The banks themselves were supposed to be in charge for packaging the specified category of securities.
20 pages (5000 words) Essay
Efficient Market Theory & Behavioural Finance with regard to Financial Crisis 2007-2010
Eugene Fama conducted the strong-form tests to know whether the investors had any monopolistic access to the information relevant to the security’s price (Fama, 1970, p.383).
6 pages (1500 words) Essay
2007 financial crisis
1. What happened in the 2007 financial crisis? Through asymmetric information hence adverse selection, the 2007 financial crisis was caused by the action and inaction by the government (Lounsbury 2010), which created a platform over which both banks, and bank-like institution taking excessive risks specifically in the mortgage backed security market (BBC News 2009).
5 pages (1250 words) Essay
Securitization, Regulation and Factors Contributing to Financial Crisis
Both legal and ethical regulations exist in the sector to ensure stability and protection of stakeholders’ interests. Securitization, another concept in the financial sector, defines the pooling together of debts and selling them to investors who then earn interest from the debt’s proceeds and is an important concept towards provision of financial services.
4 pages (1000 words) Essay
A)The financial crisis of 2007-2010 was it simply the result of lax regulation, or were a range of factors at play (50 marks)
To explain the origin of these crises, I will start by explaining different phases of ‘The Great Bubble Transfer’, which led to speculative bubble in the home mortgage market. Under each of these phases, it will be explained how lax of regulation and other factors led to this crises.
21 pages (5250 words) Essay
The financial crisis of 2007-2010 was it simply the result of lax regulation, or were a range of factors at play (50 marks). I
The news that were most shocking was the filing of the bankruptcy protection by some of the major house mortgage lenders like New Century Financial Corporation that was regarded to be the largest in USA and Northern Rock that was largest in UK, filing of bankruptcy petition by Bear Stearns to bail out two of its hedge fund and at the same time JP Morgan Chase acquiring Bear Stearns, liquidation of Lehman Brothers with pre bankruptcy petition assets of value $700 billion, acquisition of Merrill Lynch by Bank of America, Federal Reserve Bank taking the control of American International Group (AIG) and Morgan Stanley and Goldman Sachs becoming the holding company of the bank (Mazumdar and Ahmad
15 pages (3750 words) Essay
Financial Crisis of 2007-2008, Lax Regulations or something Else
Institutions like Lehman Brothers, Citibank, HSBC and many other global financial houses simply crumbled to the unwinding financial crisis. Though the exact causes of the crisis may not be easier to explore and understand however, lax regulations are considered as the major cause of the crisis.
12 pages (3000 words) Essay
Financial Crisis of 2007
When considering the possible causes for this economic situation, fundamental defect of the free market system is the prominent reason for the crisis. In the US economy, a secure and sustainable economic order is not ensured by the economic regulatory. As a result, banks and financial institutions in the developed countries are not restricted from spending more than what they can afford.
7 pages (1750 words) Essay
Efficient Market Theory & Behavioural Finance with regard to Financial Crisis 2007-2010
The author explains how behavioural finance can explain the anomalies which have persisted too long to lead to this crisis situation. He states that The efficient market hypothesis is based on the Random Walk Hypothesis, which states that the changes in a stock’s price are a random departure from its previous price.
7 pages (1750 words) Essay
2007-2009 Financial Crisis
Thesis statement: The 2007-2009 Financial Crisis resulted in unemployment, banking collapse, and decline in international trade. As pointed out, the financial crisis of 2007-2009
1 pages (250 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment