Global Financial Crisis Essay

970 WordsMay 1, 20114 Pages
Introduction Recently, the world has experienced a severe economic recession with high unemployment rate and low industrial output due to business failures and low consumer spending. This recession is the outcome of the global financial crisis that has originated in the United States and extended to the rest of the world in 2008. The financial crisis has forced the insolvency of many banks and financial institutions in the United States and the world. Behind the scene The credit crisis was a direct result of failure of the mortgage market in the U.S. The problem has started in 2001, when the Federal Reserve of America (FED) decided to lower the interest rate to 1%, in order to overcome the negative affect of September 11 on the growth of the economy. The abundance of credit has encouraged many Americans to buy their own houses by obtaining loans from Mortgage Lenders such as Fannie May and Freddy Mack. The excessive lending has increased demand for new houses as more Americans entered the mortgage market. The result was a boom in the Real Estates market from 2002-2006, with houses prices almost tripling during this period. What has lead to such a situation when on the first look everything seemed to be well organized and planned only for developing intensions? One of the major reasons was the greed that led even the main economical district of USA Wall Street nearly to a total collapse. Greed is an excessive desire to possess wealth or goods with the intention to keep it for one’s self. Greed accompanied with NINJA generation (No Income, No Job, No Asset) made it possible officially to borrow money for buying houses for all citizens of U.S. even with low income. Moreover, the whole drama did not have any responsible faces. On the top of all non-stop mortgages, Wall Street placed a trillion dollar bet, with mostly borrowed money, that the riskiest

More about Global Financial Crisis Essay

Open Document