Financial crisis - Research Paper Example

The reasons for current financial crisis in America can be attributed to many things like, The Federal Reserve, is making credit cheap, Home buyers, who took advantage of easy credit contributed to bid up the prices of homes excessively. Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses. Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes etc.

Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral. The Bush administration has failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market. (Bianco, 2008) Unlike many other countries like India, the life style of American people is entirely different. They believe in spending rather than saving. They will depend the financial institutions for loans whenever they are in need of bulk amount of money like buying a car or home.

The financial institutions were ready to give loans without conducting proper enquiry about the financial capabilities of the loan seeker. Most of the people who took the loans were failed to return it in time because of the recession in their economies and hence the financial crisis started to destroy the financial institutions. “Bank of America, Citigroup, Wells Fargo and J.P. Morgan Chase have weathered the financial crisis in reasonably good shape, while Bear Stearns collapsed and Lehman Brothers has entered bankruptcy, to name but two of the investment banks which had remained independent despite the repeal of Glass-Steagall.

” (Miller & Jackson, 2008) On the other hand the Indian people have the habit of saving