The Financial Crisis and Credit Crunch Analysis

The Global Financial Crisis or 2008 financial crisis is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. It resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world.

The lack of money became so bad in the US, UK, and Ireland, that the government had to bail them out. the realization of all this by the public lead to a complete loss of confidence by consumers and investors all around, this lead to less spending and investing. all this lead up to something called a credit crunch. a credit crunch is a sudden shortage of funds for lending. the credit crunch was driven by the bad handling of loans on mortgages that led to a rise in defaults and sub prime mortgages. these mortgages were in america, but the downturn was able to spread throughout the entire globe. people with poor income and poor credit were getting huge loans for mortgages that they werent able to pay back. a cause for this was probably due to the huge incentive for mortgage brokers to sell mortgages at high prices because that's how they got paid, and that played a huge roll in the rise of mortgage defaults. mortgage broker borrowed money to be able to lend mortgage, the lending was not financed out of savings accounts. for many of these mortgages, there was a 1 to 2 year period of low interest rates, at the end of these periods, interest rates rose dramatically, not allowing people to afford the mortgage

The financial crisis did not happen in a day or two, it was triggered by a variety of events that happened.in years ago. In year 1998, The Glass-Steagall legislation was repealed, it is a legislation that separated investments and commercial banking activities in the financial sector. This act then allowed banks in the US to act in both the commercial and investment fields, which allowed them to participate in highly risky business. This is somehow responsible for the mortgage-backed derivatives, which is a main cause of the

The global financial crisis (GFC) is begun with the collapse of Lehman Brothers in Sep. 2008, when a loss of confidence in stock investors of the value of sub-prime mortgages caused a liquidity crisis, resulting the global central banks injecting a large amount of capital into the financial markets and consumers ' confidence hit the bottom, according to McKibbin, W.J. (2009, p.1).

The Global Financial Crisis of 2008 is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It resulted in the threat of total collapse of large financial institutions, the bailout of small and big banks by national governments, and downturns in stock markets around the world. In United States, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer confidence, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European

The financial crisis of 2007 was the direct result of housing bubble burst, also known as the United states subprime mortgage crisis. The United States subprime mortgage crisis was a, nationwide banking emergency, occurring between 2007-2010, which contributed to the U.S. recession of December 2007 – June 2009. Subprime lending means, “making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc. (investopedia.com).” Up until 2006, It was easy to have good credit because the credit (money) they obtained came from different countries. As a result, people used this credit to get expensive home loans, and this is what created an economic

The Financial crisis has its roots in real estate and the famous sub-prime lending crisis. In 1990, during president Bill Clinton administration, Commercial banks and residential properties witnessed their values increase for almost a decade. Increases in the house market coincide with the lowering of interest rate and lending standards to unqualified borrowers accepting them to take out mortgages whereas at the same time the government deregulations mixed the lines between traditional financial institutions and mortgages lenders. The real estate loans were distributing through out the financial & Banking system in the shape of CDOs and other complex derivatives in order to scatter or spread the risk; however, when home values stopped to rise and homeowners flopped to keep up with their payments and banks were forced to foreclosure their homes.

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

Peter J. Wallison sums up the 1992 action by Congress: “The seeds of the crisis were planted in 1992 when Congress enacted “affordable housing” goals for two giant government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp (Freddie Mac).”7 The government sponsored entities, Fannie Mae and Freddie Mac were reporting insufficient and inaccurate data to the government regarding their purchases of the mortgages, thus feeding the growth of the existing housing bubble.8 Low down payment mortgages inflated housing prices because buyers could afford to buy a larger, more expensive house with the same down payment as the smaller one. This resulted in many home buyers getting

The subprime crisis that emerged in the US housing mortgage market in 2007 Snow balled into a global financial crisis, and a global economic recession followed. The Financial landscape has changed significantly after the collapse of Lehman Brothers in September 2008. An important lesson, post-September 2008, is that irrespective of the degree of globalization of a country and the soundness of its domestic policies, a financial crisis could spread to every economy.

The housing market crash, which broke out in the United States in 2007, was caused by high risk subprime mortgages. The subprime mortgage crisis resulted in a sudden reduction in money and credit availability from banks and other lending institutions, which was referred to as a “credit crunch.” The “credit crunch” and its effect spread across the United States and further on to other countries across the world. The “credit crunch” caused a collapse in the housing markets, stock markets and major financial institutions across the globe.

The global financial crisis started in 2007 and from 2008 it is called financial crisis. This is considered to be the

The most recent financial crisis hit the world economy in the late 2007 and early 2008. It crashed the

The Global Financial Crisis (GFC) began in July 2007 in the United States (US) following the decline in the countries already poor credit ratings and the subsequent collapse of the US housing market and prominent investment bank Lehman Brothers which sent a wave of fear around global economies including Australia and resulted in the largest drop in global economic activity in the modern era. (W. McKibbin, A.Stoeckel, 2009, pg 1).

The subprime loan crisis (SLC) was a national banking emergency caused by a sharp increase in high-risk mortgages going into default after the bursting of the housing bubble. A financial crisis occurs when there is a disruption in the flow of funds between borrowers and lenders within the financial system causing financial friction. A financial crisis can arise due to a number of factors such as incorrect speculation of stock markets, an international crisis or like in the case of the 2008 crisis, an asset price boom or bust. A global financial crisis (GFC) is a situation where many nations at the same time decide that the contracts they hold are risky or that the financial assets they hold are likely to be worth less than thought