Financial Crisis
Was the financial crisis, which led to the austerity measures now being followed by the coalition government, caused by investment bankers or by government?
A lot of economists stated that the recent financial crisis was the worst crisis since Great Depression, which resulted in the collapse of a number of large financial institutions followed by the government’s bailout and austerity measures. It has affected billions of people globally, which made bankers and politicians very unpopular. Though not a lot of people understand what are the main causes of the crisis and who really are the people to blame. Initially before indicating who really caused the recent financial crisis, it will be very essential to point out what caused the financial crisis? According to Charles Bean, one of the Deputy Governors of the Bank of England, the fundamental cause of the financial crisis is not a particular group of assets, but rather a combination of macroeconomic and microeconomic factors that encouraged increased levels of risk taking. These factors includes; the subprime lending, growth of the housing bubble, easy credit conditions, deregulation, extremely high use of financial leverage and an excessive complex innovation in the derivatives markets that were poorly understood by many investors as well as regulators and a large number of frauds in the financial industry were reported after the crisis.
The specific factor, which made the greatest contribution to the crisis was the subprime lending in the United States. It all began with an intense competition between mortgage lenders for revenue and market share several years before the crisis. In order to gain more revenue and customers, a lot of lenders relaxed the conditions and standards with the aide of government deregulation. Clinton Administration pressured Fannie Mae to expand mortgage loans among people with low and moderate income, who are unlikely to pay back the loan, it was taking on a huge risk. This
A lot of economists stated that the recent financial crisis was the worst crisis since Great Depression, which resulted in the collapse of a number of large financial institutions followed by the government’s bailout and austerity measures. It has affected billions of people globally, which made bankers and politicians very unpopular. Though not a lot of people understand what are the main causes of the crisis and who really are the people to blame. Initially before indicating who really caused the recent financial crisis, it will be very essential to point out what caused the financial crisis? According to Charles Bean, one of the Deputy Governors of the Bank of England, the fundamental cause of the financial crisis is not a particular group of assets, but rather a combination of macroeconomic and microeconomic factors that encouraged increased levels of risk taking. These factors includes; the subprime lending, growth of the housing bubble, easy credit conditions, deregulation, extremely high use of financial leverage and an excessive complex innovation in the derivatives markets that were poorly understood by many investors as well as regulators and a large number of frauds in the financial industry were reported after the crisis.
The specific factor, which made the greatest contribution to the crisis was the subprime lending in the United States. It all began with an intense competition between mortgage lenders for revenue and market share several years before the crisis. In order to gain more revenue and customers, a lot of lenders relaxed the conditions and standards with the aide of government deregulation. Clinton Administration pressured Fannie Mae to expand mortgage loans among people with low and moderate income, who are unlikely to pay back the loan, it was taking on a huge risk. This