Statistical techniques for investment, finance or economic problems - Essay Example

Five years later, defaults began kicking in as more homeowners were unable to refinance their loans or sell their depreciating homes, gradually snowballing into hedge fund suspensions and massive write-downs. The following year the snowball accelerated into an avalanche, effecting the closure or sell-out of financial stalwarts Bear Stearns, IndyMac Bancorp, Merrill Lynch and Lehman Brothers. The two largest mortgage finance companies, Fannie Mae and Freddie Mac, needed a bail-out by the Bush administration; not long after insurance giant American International Group (AIG) followed suit.

With the advent of the new administration, one of President Obama’s first official acts was to sign into law a $700 billion bailout in what is called the Troubled Assets Recovery Program (TARP) (Amadeo, 2009). The crisis spawned a credit crunch, prompting a substantial infusion of capital into the global financial markets by the United States Federal Reserve, the Bank of England, and the European Central Bank (Elliott, 2008). Financial institutions and intermediaries throughout the United States and Europe were thus severely affected in the contagion.

On the other hand, the Asian financial markets have exhibited remarkable resilience to the crisis that has engulfed the US and Europe. China can count on its over US$ 100 billion inflows from 2003 to 2007 (Rodman, 2009). India may be somewhat more affected, with some expected possible impact on credit availability. (Rediff India Abroad, 2008) However, there is still a chance that China and India may succumb, albeit belatedly and less severely, to the effects of the financial debacle. These countries were the largest contributors to reductions in global poverty in the last two decades, as confirmed by several academic studies.

However, they are now in danger of reduced economic growth, with a slowdown or even reversal in the poverty alleviation efforts. (Bajoria, 2008) With this