A number of investors had seen these signs as warnings for the development of the crisis situation. Based on these signs, some of the investors had predicted that the tremendous growth of the US economy was a temporary phenomenon and the US economy was ultimately going to collapse (Connolly and Wall, 2011). Several researches have been conducted since then, and are being continued still now, regarding the causes and the warnings of the crisis. Several leaders belonging to different countries have predicted the inevitable collapse of the economy of United States. However, some of the leaders made legitimate and confident forewords about the critical elements within the economy’s financial structure and the extent of dire consequences that the economy was going to face in the near future (McDonnell and Burgess, 2013). Several logical analyses were made on the facts and data that were collected from the-then economic and financial condition of the economy. A considerably large fraction of investors, including buyers of private homes, received credible warnings about the occurrence of a housing bubble. According to some researchers and market observers, the root to this crisis lied in the policies and regulations developed by the Federal Reserve. Additionally, many of the investors ignored these messages received and did not make any changes in their course of action. Banks were also bound by the need to meet the credit needs of local investors. This policy forced the “banks to make subprime loans” (Gramm and Solon, 2013). Bank authorities transferred this pressure to the banking personnel and regulators to make more loans of the subprime category. The banks performance was measured on the basis of the loans that they were able to extend to the investors (Wang, Ali, and Al-Akra, 2013). In this process, the issue of credibility of the investors was ignored. The quota to provide affordable housing loans was fixed at 30 percent in the year 1993 (Gramm and Solon, 2013). This was made during the era of President Bill Clinton of the USA. Within three years this quota was increased to 40 percent. The quota further increased within a few years and reached the target of 50 percent by 2000. At that point of time, the administration of President George W. Bush took control of the American economy. Under his control the affordable housing loan goals were increased further. Documents from that period of time reveal that “these quotas were promoting irresponsible policy” (Gramm and Solon, 2013). The risks involved in these subprime loans were severely high as due to lack of credibility check a large proportion of the borrowers would be found to be defaulters. According to some sources, researchers claim that as high as 28 million high risk loans were provided to borrowers. Although the safety enforcement laws advised the banks to reduce high loans, there existed conflicting regulations regarding the promotion of affordable housing loans. Thus, the safety and soundness measures were ineffective in restraining the pattern of loan giving, conflicting laws regarding providing housing credit
Financial Markets and Institutions Table of Contents Financial Markets and Institutions 1 Part 1: Warnings about the financial crisis 3 Part 2: Parties culpable for the “crime” 5 Effect on Germany 6 Part 3: US financial crisis responsible for failure of financial institutions around the world 7 Reference List 9 Part 1: Warnings about the financial crisis The financial crisis of 2008-2009 has affected and deformed the financial system of the United States and Euro zone countries and also many other countries in the world…
According to Allen and Gale (2000, chap 1), Financial intermediaries can be broadly classified into: deposit taking institutions such as banks, credit unions, savings and savings societies; Insurance schemes such as life insurance policies; investment ventures such as retirement benefits schemes and mutual funds.
Financial market securities include bonds, stocks, commodities, agricultural goods and precious metals. The derivatives market is financial market for derivative instruments such as options contracts and futures contracts. The characteristic feature of derivative instrument is that the value of derivative is derived from the underlying.
Among the different product traded are equities, fixed income securities, derivatives and foreign exchange. This paper will focus on the foreign exchange market in the U.S. and the types of foreign exchange transactions. It will also focus on the factors affecting the interest rates, ease or difficulty of forecasting the interest rate changes, role of Federal Reserve towards the U.S.
Now, the question is how an individual invest. He/she may begin to build up his financial assets in order to pay for long term financial goals. He/she may want assets accessible to make down payments on housing and may also want to guarantee that human capital is low risk by buying disability insurance and term insurance (Schewart, 1999, pp.1-2).
Financial assets are also known as securities. It is noted that financial market does not only provide capital/funds to the government, households and the companies only but also, they offers relevant information’s that an entrepreneur can use to start his/her own business.
This paper will define what financial markets and institutions are and their implication in an economy particularly in a largely consolidating world market.
Financial markets "consist of agents, brokers, institutions, and intermediaries transacting purchases and sales of securities." The individuals and institutions operating in the financial markets are linked by contracts and communications networks that form an externally visible financial structure, laws, and friendships.
ediaries and institutions operating the US financial market receive savings from domestic households, business houses as well as the Federal Government and invest those savings. The role of the financial market is to invest these savings to the most resourceful investments,