The Financial Crisis Of 2007-08 - 1150 Words

During the lead up to the financial crisis of 2007-08, a term was coined to describe what was happening in the financial markets. The term was: Shadow Banking System. The creation of the term was attributed to economist and money manager, Paul McCulley, who described it as a large segment of financial intermediation that is routed outside the balance sheets of regulated commercial banks and other depository institutions (St. Louis Fed). In simpler terms, institutions that are in the shadow banking system are not regulated like commercial banks, and carry more risk due to their investments. Examples of shadow banking institutions are money market funds, mutual funds, hedge funds, etc. During the early 1990s, most American citizens didn’t know or never heard of money market funds or mutual funds; typically, the only people who knew of the â€Å"shadow banking system† were most likely senior officers at the big banks or individuals who were experts in the financial markets . However, that all changed. At the turn of the century, the shadow banking system started to gain steam and was growing at a faster rate than traditional banks. At the peak of its growth, right before the financial crisis, the shadow banking system, in terms of liabilities, was about 1.5-2 times larger than traditional banks (St. Louis Fed). Before the Financial Crisis, many Americans were investing their money in money market funds or mutual funds, and if you had a substantial amount of money laying around, youShow MoreRelatedThe Financial Crisis Of 2007-081439 Words   |  6 PagesSeveral factors lead to the 2008 financial crisis. The 1999 repeal of the Glass-Steagall Act effectively removed the separation between investment banks and depository banks in the United States. Credit rating agencies failed to price the risk involved with mortgage-related financial products accurately. The Government, concerned with not performing economically as well as the Clinton administration b elieved increasing home ownership was the answer and reduced obstacles (like loan income/debt documentation)Read MoreThe Financial Crisis Of 2007-081894 Words   |  8 PagesThe definitive event of the early twenty-first century was The Financial Crisis of 2007-08. Since that event, scholars have tried to identify what the causes and the effects of the crisis. The causes and effects of the collapse are varied and many scholars show a consensus about what these causes and effects are. Scholars who researched The Financial Crisis of 2007-08 agree that bank deregulation starting in the early 1970’s a major contributor. The deregulation allowed for banks to increase inRead MoreThe Financial Crisis Of 2007-081389 Words   |  6 PagesThe financial crisis of 2007–08, also known as the Global Financial Crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. Mr. Ben Bernanke, Chairman of the Federal Reserve at the time, believed it was equally problematic in many ways; although unemployment only reached half the level due to the Fed’s actions combined with a $700B stimulus. It collapsed large financial institutions, and stock markets dropped to half their pre-crisisRead MoreThe Global Financial Crisis Of 2007 / 081194 Words   |  5 Pagesdollars. The Australian government has to deal with multiple issues in the macroeconomic world to achieve three goals. The factors affecting thes e goals have to be identified and either harnessed or blocked by the government. 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The Financial crisis in 2007-2008 brought the massive hurt to everyone in the world. The worldwide financial problem affected thirty million people loosing their jobs and cause many countries getting close to go bankrupt (Peah, 2014). This is the global issue that everyone should be consider of. The purpose of this essay is to determine if the deregulation was the underlying cause of the 2007/08 financial crisis. The essay argues the deregulation was the underlying cause of the 2007/08 financialRead MoreThe Global Financial Crisis Of The Usa1383 Words   |  6 PagesThe recent global financial turmoil started on July 2007 ,mainly in the USA and spread among developed nations in the later part of 2008 and subsequently shifted to the developing nations .this crisis consisted of some prime drawbacks not only for the developed countries but also for developing countries .the most talked about issue in the recent financial arena in the global financial crisis ,which started to show its effect in the middle of the year 2007.the turmoil ,however ,was rooted in theRead MoreEssay On Regulating American Banks1033 Words   |  5 Pagesrestructure the elephantine law which had recast financial regulation following the 2007-08 crisis. Thus, he asked Steven Mnuchin, the Treasury secretary to measure all the rules of America against 7 broad principles, bail-outs prevent ion by taxpayers as well as instituting more efficient regulations inclusive. Mnuchin provided a report on banks where he proposed installments to cover capital markets, asset, and insurance management together with financial technology and nonbank institutions. Also, allRead MoreFinancial Crisis : The Fiscal Crisis1355 Words   |  6 Pagesgeneral, a financial crisis is not an accident; it may take several years and has complex and interlaced causes (Claessens and Kodres, 2014). The 2007-08 global financial crisis is a typical case due to long-term non-intervention policy and loose regulation for financial market from government. Moreover, it involved the complex relationship between government and financial institutions. In order to look at this issue in particular, this essay first goes though the timeline of the 2007-08 financial crisisRead MoreThe Financial Crisis Of The Housing Bubble1482 Words   |  6 PagesThe Financial Crisis that started in 2007 The 2007-08 financial crisis that started in the US is often dubbed as the housing bubble. Although, the burst of the housing bubble is the tipping point of the crisis, the true causes have building up slowly and steadily for almost over a decade. The burst of the housing bubble was merely a reflection of the built up baggage. This crisis is a classic example of how dangerous derivatives can turn out to be if not properly managed. Causes of the crisis and