2008 Financial Crisis Essay

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Recommended: What are the factors causing the 2008 global financial crisis and its consequences

1. Discuss the causes of the 2008 Financial Crisis The 2008 financial crises affected millions of people and for many months it remained the hottest topic during the presidential campaigns. Different major financial institutions were assimilated by other financial institutions, received bailouts from the government, or outright crash. So what caused the crises? Different economists tried to explain the origin of the crises that is still regarded as the worst up to today. In the succeeding paragraphs, I will discuss the causes of the financial crises experienced in 2008. The chief cause of the crises was the dramatic change in the ability to come up with new lines of credit. This move dried up the flow of money and at the same time, slowed up the economic growth, selling and buying of assets. It was a great hurt to businesses, individuals, and financial institutions. Many institutions ended up holding mortgage-backed assets of which the value had dropped precipitously and did not produce enough money to clear the loans. Their reserve cash dried up and this restricted their ability and credit to make new loans. Economists also say that there were other factors that led to crises. One of them is the cheap …show more content…

Discuss in detail the role of the credit rating agencies in our capital markets including what they do and what they do not do. Credit rating agencies provide global investors with a clear analysis of any risk that is associated with securities of debt. The securities may include corporate bonds, government bonds, municipal bonds, certificate of deposit, collateralized securities (e.g. mortgage backed securities and collateralized debt obligation), and preferred stock. The risks may be determined by taking a likelihood of events to occur, E.g. a local government may fail to come up with timely interest payments of a given debt. Letter grade characterizes these ratings. The safest and highest is AAA and the letters reduces (i.e. AA or A) as the grades

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