Premium Essay

B) What Were Some of the Major Causes of the Recent Global Financial Crisis (Gfc), and What Have Been Some of the Ongoing Economic Impacts, Either Globally or Locally in Singapore, of This Crisis?

In: Business and Management

Submitted By ting123
Words 3381
Pages 14
A period of economic difficulty that consumers and markets are experiencing world-widely is known as global financial crisis (BusinessDictionary, 2015). It occurs when there is an increase in asymmetric information coming from disruptions in financial system that is interrupting the funds from channelling efficiently between savers and households as well as preventing firms from having productive investment opportunities (Mishkin and Eakins, 2012, pp. 204).

The recent global financial crisis began in the year of 2007 and the intensity increased in the subsequent year. Global financial crisis in 2007 happened as result of a number of factors such as government mandated subprime lending, imprudent mortgage lending, housing bubble, securitization and a few other more factors, which will be discussed.
The government mandated subprime lending has contributed to the financial crisis by promoting affordable housing under Community Reinvestment Act (CRA) as well as Fannie Mae and Freddie Mac. Through affordable housing, banks were encouraged to participate in imprudent mortgage lending as mandated by the federal in order to help low-income borrowers, which imprudent mortgage lending is another cause that contributed to the global financial crisis (Jickling, 2009). As a result of mortgage lending, low-income families are able to purchase houses that they are not be able to afford to purchase without the policy. The loans require low or no down payments and limited documentation of income are to be produced (Wallison and Pinto, 2009). Due to limited documentation presenting to get loan, asymmetric information existed as the financial institutions providing loans were lack of information about the borrowers.

Housing prices are able to rise to unsustainable levels as a result of the easy money policies being implemented and an increase of people who wants to…...

Similar Documents

Premium Essay

How China Rises

...rises What lessons can be drawn from China's spectacular and sustained economic growth? As Hu Jintau remarked at the 17th Congress of the Chinese Communist Party, the period since the previous Congress five years ago has been extraordinary. China's economic achievements have been arousing not only astonishment and admiration but also some anxiety. In the past twelve months alone, The People's Republic of China (PRC) has overtaken Canada as the biggest source of imports to the USA, and overtaken the USA as the biggest source of imports to the European Union. Concern about the low level of investment in Africa has been displaced by concern about the effects of the high level of Chinese investment in Africa; there is now even anxiety about the effects of investment by Chinese state-owned firms into the Western economies. The Chinese Communist Party is also expressing concerns. The themes of its 2007 Congress included protection of the environment and the achievement of social harmony. According to some estimates, China has displaced the USA as the world's biggest source of greenhouse gases. Inequality is rising as fast as pollution: China now has over 800 individuals with a personal wealth of more than a hundred million US dollars each, up from 500 in 2006; while the average income in rural areas of China is 480 dollars per year. Made in China. Hu Jintau's remark on the extraordinary nature of the most recent years can be faulted in only one sense: China has been......

Words: 51278 - Pages: 206

Free Essay

Re: Osi Models Layer

...Buyer: Lisa McDowell Executive Marketing Manager: Robin O’Brien Marketing Assistant: Mack Patterson ©2007 Pearson Education, Inc. Pearson Prentice Hall Pearson Education, Inc. Upper Saddle River, NJ 07458 All rights reserved. No part of this book may be reproduced in any form or by any means, without permission in writing from the publisher. Pearson Prentice Hall™ is a trademark of Pearson Education, Inc. All other tradmarks or product names are the property of their respective owners. The author and publisher of this book have used their best efforts in preparing this book.These efforts include the development, research, and testing of the theories and programs to determine their effectiveness.The author and publisher make no warranty of any kind, expressed or implied, with regard to these programs or the documentation contained in this book.The author and publisher shall not be liable in any event for incidental or consequential damages in connection with, or arising out of, the furnishing, performance, or use of these programs. Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ISBN: 0-13-243310-9 Pearson Education Ltd., London Pearson Education Australia Pty. Ltd., Sydney Pearson Education Singapore, Pte. Ltd. Pearson Education North Asia Ltd., Hong Kong Pearson Education Canada, Inc., Toronto Pearson Educaci n de Mexico, S.A. de C.V. Pearson Education Japan, Tokyo Pearson Education Malaysia, Pte. Ltd. Pearson Education, Inc., Upper......

Words: 317095 - Pages: 1269