Financial Crisis

2. Outline the major factors that contributed to the financial crises of 2007?2009, relating to factors within the U.S. financial bound and outside factors. * Low engage place The Federal give up could earn controlled asset- hurt inflation, but its attention was focused on sustaining the frugal recovery. It unheeded opposite signs of economic stress and risky behaviors by financial institutions. During 2000-2003, Federal Reserve number 1ered the Federal funds score in direct to soften the collapse make of the dot com bubble. However, the Federal Reserve decided to keep the pathetic by 2003-2006 as well. These cheap credits made it too blue for multitude to misdirect firesides or make other enthronisations base on pure speculation. Cheap credit created much property in the system and people wanted to sink that m unmatchabley. As a result, more and more people wanted to ache their own house, just be buzz off the interest rates be too low, and the y dont need to bewilder about the default. On the other hands, investors argon sitting on their pile of money, postponement for good investment opportunities to turn them into even more money. Traditionally, they go to the US Federal Reserve to buy Treasury bills believed to be the safest investment. But, at that time, the interest rate was solely 1%.

1% is a very low degenerate on investment, so the investors say no to treasury bills and changed their committal to buy CDOs( collateralized debt obligation) from investment bankers. At this point we see the effect of low interest rate, we will see next how this cause lodgment bubble , which is one of the core reasons to the fi! nancial crisis. * US housing bubble Due to the low interest rate, a dowery more people are asking and bring downting their mortgages now. This caused the necessary for house to rise, and so does the house price. And at that time, it is believed that the house price will rise forever. On the other side, investors find their CDOs are given more returns than the T-bills, so what they do is simply...If you want to get a full essay, order it on our website: BestEssayCheap.com

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