Causes for the 2007-08 Financial Crisis - Essay Example

Download file to see previous pages... The property market was a major contribution to the financial crisis. The collapse in prices of mortgaged houses put homebuyers in debts as they had speculatively spent so much money on overvalued property. The financial crisis arose from weak financial policies, which permitted banks among other financial institution make precarious investments as the outline portrays.
b. Response: The financial crunch affected investment in the real estate’s industry first in the United States before the effects spiraled to other major global economies thus reducing the volume of activities at major stock markets thus culminating in the crisis.
a. Response: With intense speculation on the size and lucrativeness of the industry, numerous investors including financial institutions increased to invest and compete for the market (Starkman, 2014).
b. Both commercial and investment banks thus competed for the market. They introduced precarious policies that permitted the banks to invest extensively in the industry without cushioning themselves from the unpredictable nature of the ...Download file to see next pagesRead More