Essays on Global Financial Crisis of 2008-2009 Case Study

Download full paperFile format: .doc, available for editing

The paper 'Global Financial Crisis of 2008-2009" is a great example of a finance and accounting case study.   This was a global economic crisis that got severe in the late 2000s spreading mostly in the industrialized nations. The impacts of the global financial crisis started in mid-2007 with the full impacts being felt in 2008. During this time, the stock markets had fallen in most places of the world, there was a collapse of some of the largest financial institutions globally, and governments even in the most wealthy nations started strategizing on financial rescue to save their financial systems.

This was a great concern worldwide since it affected almost everyone in the interrelated countries. The crisis was linked to careless lending habits by the financial institutions and this was encouraged by the government and securitization of mortgages in the US. This crisis had many severe economic consequences such as unemployment, reduced international trade, and increased prices in the basic commodities. The economic recession was announced in December 2008 by the National Bureau of Economic research in the United States (Copestake, 2010). This global financial issue has been blamed on several factors including greed, inadequate regulation, and oversight in the United States of America among other factors.

This essay, therefore, looks at how these factors contributed to the global financial crisis of 2008 to 2009 and other contributing factors. Causes of the financial crisis of 2008-2009 The global financial crisis was mainly caused by the credit processed in America that the government had initiated to increase the borrowing and lending activities of its citizens. Credit plays a big role in the economy of the United States when it is utilized properly.

However, the credit facilities were faced with greed, poor regulation and oversight among others. Corporate Greed Greed has been thought to be one of the factors that contributed to the global financial crisis of 2008-2009 in America. This is based on the facts given by Congleton (2009), who blames it on mortgage housing deal. In his article on the public choice journal, he explains that mortgage brokers contributed to the issues since they could determine whom to give the loan, and then passed the responsibility to others.

People started taking risky mortgages which were still being approved by the brokers. To meet this responsibility, the brokers packaged them with other mortgages to resell them as an investment. Many people, therefore, took the loans hoping that they could flip them to get profits or pay them later at a cheaper price. Copestake, (2010) also supports the fact by stating that banks then feared the unknown. This is because they did not know who owned what. Banks could also not lend to each other due to the fear that the borrowers could default the loans, or that the banks themselves could default.

They even avoided recording the market price of their assets in their accounting books for the fear of being perceived as bankrupt. These financial institutions, therefore, suffered due to the greed of the brokers and the borrowers. Many people, therefore, became rich quickly and they were longing for more. Brokers were therefore actively selling the loans so long as the buyer could just say that he or she could afford it. The brokers were just selling the mortgages, reducing the sale and them packaging them with other mortgages that were backed with assets.

This was like a time bomb that would later explode. It is this greed for profits and intoxicating success that resulted in the collapse of many financial institutions.

References

Copestake, J. (2010). The global financial crisis of 2008–2009: an opportunity for development studies? Journal of International Development. Volume 22, Issue 6, pages 699–713.

Gore, C. (2010). The global recession of 2009 in a long-term development perspective. Journal of International Development. Volume 22, Issue 6, pages 714–738.

Wessel, D. (2010). "Did 'Great Recession' Live Up to the Name?” The Wall Street Journal.

Sharma, S. (2010).The Arab world amidst the global financial crisis of 2008- 2009. Contemporary Arab Affairs, Volume 3(1): 38 – 52.

Congleton, R. (2009). “On the political economy of the financial crisis and bailout of 2008- 2009,” Public Choice, 140: 287-317.

Nanto, D. (2010). Global Financial Crisis: Analysis and Policy Implications: Journal of Economic review. Vol. 12 (3): 94-101.

Tapiero, C. (2010). Risk Finance and Asset Pricing: Value, Measurements, and Markets: Volume 563 of Wiley Finance. 403-412.

Boatright, J. (2010). Finance Ethics: Critical Issues in Theory and Practice: Volume 11 of Robert W. Kolb Series in Finance. Vol. 11. (4) 2

Books, LLC. (2010). Late 2000s Global Financial Crisis: Late-2000s Recession, Financial Crisis of 2007-2010, 2008-2009 Icelandic Financial Crisis. 8(5). 345-365.

Download full paperFile format: .doc, available for editing
Contact Us