Financial Crisis

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Date Submitted: 11/19/2012 01:27 PM

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Financial Crisis 2008

In the 2007 one of the largest global financial crisis in the world started. A lot of bank and insurance company fell in world, and the financial crisis affect the whole world quickly. Until today, it still has huge impact on today’s world economy. In many economists mind 2008 financial crisis was the worst financial crisis, even though during 1997 Asia financial crisis the situation would not be as bad as 2008. As the result of 2008 financial crisis, many financial institutions fell and government need to take tons of money to help those banks get out the dangerous situation. Also, the world’s stock market got into a very low position for a long time, and housing market also crash. The financial crisis caused trillions of dollars loss from business and individual. In addition, the financial crisis leaded the global recession and the European sovereign-debt crisis.

It all started from American housing bubble, and this is the immediate reason for the whole financial crisis. During 1997 and 2006, the price of American houses had a huge development, and the increasing was over 124% [1]. Also, many banks and funds offered easy credit conditions, so many families would like to take a home mortgage to buy a house. As the price of house going up, they were all earning money. Therefore, most invertor considered housing market was the best place to invest their money, so they buy a lot of mortgages and mortgage-backed securities. Mortgage-Backed Securities is a kind of way securitization. Because of the different types of loans were much easier to get as before, many investor and consumers took lots of debt, such as, mortgage, credit card, and auto. However, the housing price would never always go up. During the year 2005 and 2006, American housing bubble got to the top of ceiling, and it exploded in the next few months. Since too many houses were in the housing market, the supply is much high than the demand, so the price of American house went...