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Finance & Accounting
Pages 6 (1506 words)
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.
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. ...
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