The Financial Crisis 2007-2008

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The Financial Crisis 2007-2008

Category: Research Paper

Subcategory: Finance

Level: Masters

Pages: 6

Words: 1650

The financial crisis 2007- 2008
The financial crisis 2007- 2008
Financial crises can be dated back to many centuries, and the history has preserved the substantial literature on these old phenomena. However, despite the many evidence of financial crises in the history, the financial crisis of 2007- 2008 was a blow to the world to be regarded the worst crisis ever (Erkens, Hung, & Matos, 2012). In effect, the global financial system was threatened to the level of collapsing in totality as stock prices declined sharply. At the same time, the loans for corporate borrowers were smaller and expensive as banks declined in offering long term and short-term credit facilities as the consumer lending declined to lead to lower investment. General the financial crisis 2007- 2008 forth came with forms destruction in the whole system.
The reasons that led to the crisis
There were various reasons that were the basis for financial crisis 2007- 2008. However, the major reason was associated with the deregulation of the financial industry. The authorities permitted to control the industry failed to do giving the banks an opportunity to engage in subprime fund trading with derivatives. Due to this opportunity that the banks had, they had to demand more mortgages to continue selling the derivatives at the high profits. As a result, interest-only loans were created that prompted more subprime borrowers to afford. Due to the high borrowing and demand for…

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