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Was Bear Stern Responsible For The Finial Crisis

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Was Bear Stern Responsible For The Finial Crisis
Why did the finial crisis of 2008 happen? Bear Sterns was the beginning of the crisis but why did it happen to them? Was Adam Smiths invisible hand concept responsible for what happened? Was is solely Bear Sterns fault? Bear Sterns along with other banks invested in subprime mortgages. They were mortgages that were given out to people that usually would not have been able to pay them off, which made them very high risk. The people ultimately could not pay for these mortgages.Once this happened these mortgages became toxic in which these investments would only decrease and never be paid off. The credit default swap on these mortgages was bound to fail because to many of the investments became toxic and cost the insurance company too much. The mortgages were never designed to fail. Bear sterns was not bailed out because the government did not think there was a systemic risk, and by doing so it would cause moral hazard throughout the stock market. In reality bear sterns was the beginning of of the recession. …show more content…
Under the invisible hand the market will reach equilibrium between business and the individuals. The invisible hand would always be there and government interference would not be necessary. This concept is very likable because the people have the power of what to buy and sell, but it also have very little e regulation and some businesses were aloud to fail. Which can be useful in the way that businesses would get a sense of security and fail at the expense of the entire economy. On the other hand some business that are so big could cause economic deprivation across the entire

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