StudentShare solutions
Triangle menu

The Financial Crisis - Research Paper Example

Nobody downloaded yet
Although greatly linked to the sub-prime mortgage crisis, the causes of the 2008 recession are complex and multi-varied. This essay discusses the role of government policy, the role of mortgage originators, securitization, and moral hazards. Additionally, it presents an explanation of how the following work as well as what role they played in the crisis: subprime mortgages, mortgage backed securities, credit derivative obligations, credit default swaps; the consequences on U.S. financial markets; and the U.S. government response. Finally, it presents the authors own perspective on the financial crisis. Analysis Perhaps the most overarching consideration in terms of the financial crisis is the role of mortgage originators, securitization, and moral hazards played. Referred to as subprime lending this process is highly complex. Throughout the late 90s and early 00s competition in the housing market greatly increased. As a means of keeping pace with the increasing competitive markets mortgage lenders increasingly increased their borrowing restrictions to individuals with less than stellar credit ratings. This process is intimately connected with government policy as in many situations it was the government that contributed through policy and pressure to loosen up the lending standards. Indeed, some researchers linked the beginning of the housing bubble to 2003 (Krugman 2009). Prior to this period Government Sponsored Enterprises (GSEs) were required to maintain conservative lending practices. As a means of enticing individuals to enter into subprime loans, lending agencies implemented high-pressure tactics, including loan incentives (Krugman 2009). This predatory lending constituted a great contributing factor to the crisis. Additionally, the rising costs of housing prices created an environment were people increasingly believed that their home purchases would continue to rise. The exact originators of this crisis are complex. One of the most frequently cited considerations is that government policies that sought to increase home ownership greatly contributed to the institutional environment that would allow for such practices to occur. Indeed, since as early as the Reagan administration the government has sought policy to increase home ownership (Wright 2010). However, it wasn’t until 1995 that the government became more actively involved in the process. In 1995, Government Sponsored Enterprises, including Fannie Mae and Freddie Mac, began receiving government incentives for purchasing mortgage-backed securities (Wright 2010). These mortgaged backed securities included loans to low-income borrowers. In 1996 this process was further enhanced as the Housing and Urban Development Department (HUD) set a goal for both Fannie Mae and Freddie Mac to purchase at least 42% of mortgage backed securities that contained households with incomes below the median for the specific area (Wright 2010). An important consideration is the notion of the Credit Default Swap. These swaps were largely implemented during the period preceding the economic meltdown. The process is highly complex, as it implements derivatives in the process, contributing to the overarching considerations regarding the difficulty in regulatory processes. Essentially what was occurring was that the institutions ...Show more
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The Financial Crisis Research Paper Example | Topics and Well Written Essays - 1500 words”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/65732-write-a-paper-describing-the-factors-leading-to
(The Financial Crisis Research Paper Example | Topics and Well Written Essays - 1500 Words)
https://studentshare.net/finance-accounting/65732-write-a-paper-describing-the-factors-leading-to.
“The Financial Crisis Research Paper Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.net/finance-accounting/65732-write-a-paper-describing-the-factors-leading-to.
  • Cited: 0 times

Summary

The Financial Crisis Introduction While the 20th century was a period of substantial economic growth for the United States, it was not without recessionary periods. In 1929 the Great Depression hitting placing millions of Americans out of works and sending the country into a recession that would be impactful for the following decade…
The Financial Crisis
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the research paper on your topic
"The Financial Crisis"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

How has the financial crisis impacted the agriculture sector in Albania
...... 11 References………………………………………………………………………... 14 Impact of the financial and economic crisis on agriculture in Albania Introduction As noted in OCED (2009:p21) the recent decade, the agrofood sector has become not only more globalized through global trade, as it sells across the world but also more incorporated into the current financial system.
15 pages (3750 words) Research Paper
Finance: Fair value accounting during the financial crisis
Investigators have claimed that more than half of the global capital which was being pooled in from one end of the corner to another by the implication of financial products, have wiped out. There were a couple of factors that backed up the crisis including the low credit history borrowers who applied for subprime loans etc (Broadley).
22 pages (5500 words) Research Paper
The Financial Crisis and Its Impact on China
Assumptions concerning the safety of the Chinese economy have been proven false in the tsunami of the financial crisis. China was expected to be exempted from the destructive recession in the West. It was also believed to be immune from the economic fall because of its insulated banking sector and ‘closed’ secure capital account.
6 pages (1500 words) Research Paper
The Financial Crisis of 2007
There is number of factors which give birth to financial crisis. The most common trigger noticed behind the occurrence of financial crisis is the negative behavior of investors, which includes panic, anxiety and fear. The most adverse consequence of financial crisis is that they usually have ripple effect, which means that the bankruptcy of a single major financial institution will result in collapse of many other related financial institutes.
7 pages (1750 words) Research Paper
The impact of the Financial Crisis on Banking Industry
Also the lower level of investment is creating negative effects on the level of production and thus on the amounts of banking deposits (Bexley et al., 2011, p. 2). This paper is aimed at describing the effects of the financial crisis on banking industry. The issue and positive and negative externalities: The list of disturbed banks on the watch list of the regulatory agencies is at a strangely high stage as well as is the absolute number of banks which are bankrupt and are forced to close.
3 pages (750 words) Research Paper
The impact of the financial crisis on the British Airways company
CAPA. “Ryanair and EasyJet continue strong growth, British Airways’ struggles continue in Sep-2009.” 8 October 2009. Web. 2 December 2012. 6 Traffic and capacity are very crucial to any airline, since they are equal determinants of the revenue generation and business existence.
7 pages (1750 words) Research Paper
Moral Hazard and the Financial Crisis
inancial system of any economy. To be explained in simple words, moral hazards fundamentally occur due to the irresponsible acts conducted by one or more parties to avail benefits from the legal or social agreements disregarding the interests of the other allied members.
8 pages (2000 words) Research Paper
Financial Crisis
This paper argues that due to ill-advised economic policies, businesses suffered, the housing market failed, and financial institutions were in disarray after the stock market plunged to new lows. A number of issues were pointed out to be causes of the
2 pages (500 words) Research Paper
The impact of the financial crisis on banking industry
Also the lower level of investment is creating negative effects on the level of production and thus on the amounts of banking deposits (Bexley et al., 2011, p. 2). This paper is aimed at describing the effects of the financial crisis on banking
3 pages (750 words) Research Paper
HOW DID THE FINANCIAL CRISIS IMPACT THE IMAGE OF SWISS BANKING
For Swiss banks, conducting business and realizing profits have turned to be highly expensive and difficult. Swiss banking systems have also been forced to manage the adverse impacts of various Swiss economic shocks, in line
3 pages (750 words) Research Paper
Comments (0)
Click to create a comment
Let us find you another Research Paper on topic The Financial Crisis for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us