Journal Entries

Journal Entry: Critical Thinking
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Journal Entry: Critical Thinking
The mortgage crisis in the United States is a central point of concern for the financial institution, the public, and the government. The causes of the crisis are a combination of forces rather than a single problem. Every stakeholder in the mortgage saga has a level of responsibility to bear for the crisis. According to Holt (2009), the human actions and inactions that led to the mortgage crisis include the failure to call into question evolving risks, predatory lending practices by financial institutions, unregulated derivatives and the unreasonable borrowing by the homebuyers. However, the officials who deregulated the financial industry bear the major responsibility for the mortgage crisis in the United States.
The lack of prudent mortgage lending standards allowed the financial institutions to engage in greedy and irresponsible business practices. The deregulation lifted the risk management regulations required by banks and other financial institution (Nicholas, Hendrickson, & Griffith, 2011). Therefore, banks shifted the burden of mortgage risks to investors and brokers, which fueled the mortgage crisis. Brokers sold mortgage loans to unqualified persons because their interest was not in the business success, but the immediate financial gain from the deals. The banks and lending organizations blindly relied on the credit rating agencies to assess risks. Further, the lack o…