Financial Crisis Of 2007-2008 How It Happened And Find...

In my essay I am going to discuss what the credit crunch actually is; how it happened and find out the reasons of it. To begin with I would like to mention what the credit crunch actually is. The financial crisis of 2007–2008, also known as the Global FinÐ °ncial Crisis, is cÐ ¾nsidered by some economists such as Nouriel Roubini, professÐ ¾r of economics and international business at New York UnivÐ µrsity, Kenneth Rogoff, professÐ ¾r of econÐ ¾mics and public policy at HÐ °rvard University, and Nariman Behravesh, chief economist and executive vicÐ µ prÐ µsident for IHS Global Insight, tÐ ¾ hÐ °ve bÐ µen the wÐ ¾rst financial crisis since the GrÐ µat Depression of the 1930s. All of them agrÐ µÃ µd that this is a â€Å"one in fifty years event†, hÐ ¾wever the latest Great†¦show more content†¦(Lecture 2, Law of Commerce, Investment and Banking). For example, Martin Wolf wrote in 2009: ...an enormous part of what banks did in the early part of th is decade – the off-balance-sheet vehicles, the derivatives and the shadow banking system itself – was to find a way round regulation. (Wolf M., 2009). Off balance sheet financing made it possible for firms to look less leveraged and allowed them to borrow at cheaper rates. (Simkovic M., 2009). Analysis by the Federal Reserve Bank of New York showed that big banks hide their risk levels just prior to opening data quarterly to the public. (Kelly K., McGinty T., Fitzpatrick D., 2010). From this moment it is possible to ask the question: What did regulators do at that moment? Critics have argued that the regulatory framework did not keep pace with financial innovation, such as the increasing importance of the shadow banking system, derivatives and off-balance sheet financing. In other cases, laws were changed or enforcement weakened in parts of the financial system. Several critics have argued that the most critical role for regulation is to make sure that financial in stitutions have the ability or capital to deliver on their commitments. Another critics have also noted de facto deregulation through a shift in market share toward the least regulated portions of the mortgage market. (Simkovic M., 2011). In overall, regulatory system makes bad impression as it seems not working properly. Author RogerShow MoreRelatedAlexander Hamilton Proposed Using A Banking System1707 Words   |  7 PagesAlexander Hamilton proposed using a banking system in America in 1781 after seeing how beneficial they were in other nations for advancing trade. In 1791, First Bank of the United States became the first commercial bank of the United States in Philadelphia, Pennsylvania. 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