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THE CURRENT FINANCIAL CRISIS
Finance & Accounting
Pages 8 (2008 words)
Effect of financial crisis on consumer finance Student name Course College Tutor Date Introduction The recent subprime mortgage crisis affected many facets of the global economy. Many countries recorded decline in economic growth as their access to loans declined.
The main aim is to prove that recent mortgage subprime crisis significantly reduced the ability of financial institutions to extend consumer credit, reducing their standard of living. Subprime mortgage crisis The recent subprime mortgage crisis was as a result of lending to people who were not qualified for such loans. Behind such crisis financial instruments and institutions are often the key drivers. The mortgage crisis was a complete loss of business by financial institutions which had enjoyed low risk lending to the mortgage sector for centuries. The complexity of financial instruments that were involved in the crisis deepened the effects of subprime mortgage crisis (Ghoshi, 2006). The subprime crisis led to a number of problems in America’s as well as the global financial system. As home owners defaulted on payment of their mortgage costs, financial institutions were drained off liquidity necessary for lending. It also led to reduction of revenues generated by many financial institutions as well as other organizations whose operations were adversely affected by the turbulence on financial markets. This led to decline in economic growth rate, forcing the United States of America and United Kingdom of Britain to record negative gross domestic product growth. ...
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