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The Recent Global Financial Crisis - Essay Example
Finance & Accounting
Pages 6 (1506 words)
The Recent Global Financial Crisis Introduction: The recent global crisis that the world suffered from had started developing for a while before it had its impacts in the middle of the year 2007 and then in 2008 (Obstfeld & Rogoff, 2009, p.1). The crisis affected the entire world with fall in the stock markets, financial institutions being sold out or warped leading to the emergency need for rescue packages from the governments in order to bail out the severely impacted financial firms…
The current study focuses on a discussion and analysis of the recent global financial crisis and the consequent credit crunch in an international financial perspective, including the events leading up to the crisis, the economic and financial consequences, as well as the government responses and lessons to be learnt. Events Leading to the Incidence of the Global Financial Crisis: The global crisis was initiated in the mortgage lending market in the US, the problem arising with the Federal Home Loan Mortgage Corporation deciding not to pay for mortgages that involved high risks. Secondly, the bankruptcy filed by New Century Financial Corporation that remained a primary lender of mortgages for customers who were riskier in nature. With the occurrence of these incidents, the house prices started dripping down and foreclosures started increasing. With the increases in the risk factors and the fall in asset prices, the financial institutions feared the payments of interests and apprehension of severe losses prevailed. ...
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