10 Pages Term paper on The Credit Crisis |Rated A+

********** NameProfessor *********** nameDate: **************************************** summary **** ***** *** discussed *** causes ** ******** *** ********* ************ during *** credit ****** Bear ******* has **** ******** *** ******** *** ************ ** ** ********** bank **** *** ****** ********* *** **** ****** ****** *** ***** begins **** ** ************ **** ****** **** of the ****** of *** previous financial ****** *** ********** ****** ********* ******** research ** *** credit crunch **** section also ********* *** latest ********* crisis ** **** *** *** ***** played by ***** in the economy *** ******** ******* ******** *** ****** ** problems *** **** ******* during *** financial ****** The **** **** ****** the conclusion ***** ** *** collapse ** ****** ************* **** severe impacts were **** ** **** Lehman brothers and all ***** ************ *** invested their funds in the **** *** ******* **** not **** **** ** *** country *** ****** *** ***** ***** Investors ****** *********** the repercussions ** the bank’sfailure ****** *** clear assurance from ***** ************ to ********* ***** ********* ******* **** losses *********** ********* **** moved ***** ******* to ******** ******* their *********** **** others ***** ***** ******** is ******************************************* There **** **** numerous ****** crunches ** the **** years ******* the most ****** ****** crunch **** had * huge ****** ** *** ****** ******* ******** ** ***** **** *** previous ******** of credit crunches *** ********* ****** ************ **** of *** ****** **** **** ******* ** *** *** ****** ******** ******* ***** *** liability ********* *** ******* ******** *** risk ****** ******* ***** ******** 2010) When * ********* institution *** * **** ****** ** ********** **** its assets **** are ** *** form of ***** ** ******* *** *** *********** **** are in *** **** of depositors or creditors *** ********* *********** *********** ** asset *** ********* ********* **** variation is *** main ***** *** *** ******** model of *** ********** investment **** *** *********** during *** ****** ****** of **** Investment banks are ********* ******* on ********** ********* ** ******* ***** ********** ************ the ****** in *** **** ** ******* and *********** of *** ********** *** long-lasting ** nature ****** during ***** of ****** illiquidity when ******* ** difficult (Brunnermeier 2009) ***** *** liability variation ** **** of the ***** why ***** **** **** ******* ********* and Morgan ******* resolved ** ****** * holding **** ***** ****** conditions ***** *** liability variation is manageable Nevertheless the ********* ******* ** ***** **** banks ****** extreme leveraging Whereas ********** banks **** conventionally implemented leverage ** approximately ** ***** ***** ******* ********** ***** **** Bear ******* ********* their leverage significantly (Crotty ***** **** ** *** ********** banks ******** ******** ****** ** ** to ******** ***** capital ** ******* **** ********* **** whether intentional ** because ** *************** ** ********** models *** **** * ***** ** approximately all episodes ** *** ********* crisis ** *** **** ******** **** aspect ** likely ** ** * *********** cause ** ****** **************** review The ********* crisis ********* with a ****** ****** in ******* and ****** ****** flow lessened ************* implying that *** ***** ** borrowing ** **** ***** investments ******* compared to secure ****** **** ** ******** ********** *** **** ********** ***** *********** ******** *** ********* mortgages (Fratianni ***** ********** ***** The ******* bubble *** *** **** ******* ****** ** *** ****** crunch ****** ******* other ******* like real ****** ******* ***** debt and ********* ***** **** ******** by *** excess ***** ****** *** ****** ****** *** caused ** three ***** ******* **** ******** ************* capital ****** *** ********* ** ***** *** ******** strategy ********* ***** During *** **** 1990s ***** *** other ***** countries *********** * **** growth rate The ***** ****** *** *** ********* ****** ** the ***** ****** was *** ******** ** global ****** ** oil Since *** ******** of *** ******* ** *** ********* are large ********* ** *** they ********* * *** ** ****** **** ******** ** ********* *** ********* ******** ** ****** ***** ******* ins ****** ********* like *** ****** ****** ** **** **** could *** a **** rate ** ******* ******** & ******** ***** ******* **** **** ** *** ***** ********* ******** ** ****** ******* ******* in the ****** ****** ******* The cost ** ********* ********* ************* *** citizens ** the ****** ***** access *** cheap credit Americans responded ** **** ********* ** borrowing **** money *** ****** ******* investments The same ******** ******** ************** ** Europe *** resulting outcome ** ******* ****** ** *** ****** ****** *** Europe was ** ******** in *** ****** ** houses ********* **** *********** **** capital ******* *** ****** rates ** ****** International imbalances *** * ***** ****** *** *** ****** and the **** significant ************* justification ****** and huge ********* ** ******* inflows **** ******* *** Europe encouraged *********** increases ** domestic ******* ************ ** ***** -risk mortgages (Fratianni ***** ********** 2010) *** * *********** period ******* ** *** ****** **** ********* **** ************ ** *** * premium *** ***** ****** **** the ****** burst *** *** ********* ***** *** the investors reassessed **** return **** ***** demand ***** ********** *** ********* what ***** **** **** ******* ** *** *** * risky asset ****** spreads *** *** ***** of **** ****** *** ***** increased ******** *** *** ****** ** ***** assets ******* (Holmberg ***** *** monetary ****** greatly ********** * ****** ****** ***** *** ******** ************* **** *** ****** **** regulating *** amount ** ****** **** *** ** ******** in *** ****** *** ******** in *** United ****** the ******* Reserve ******** *** ************ ** credit *** ******** *** by ***** ********** ****** ********* ******* * credit ****** ***** ***** ********* ***** *** ******* ***** ** *** Federal ******* do *** have ********* ******* However ***** ******* *** fully **** **** **** ********** cause a ****** ****** *** ******* *** fed reserve ********** ************ rates ******* *** ***** **** ** 2006 This move resulted ** increased ***** in the ******* As a ****** the ****** ** ****** **** ** ********* 2012) If *** Federal Reserve had ******** an ********* ****** such as *** ****** **** that ********* interest ***** the ******* ****** *** the subsequent credit ****** The monetary ****** *** ****** ** ******** *** ******* ** * ****** For ******** ****** * *** **** *** **** * ******* ** *** ***** ** * ****** ****** This ** ******* *** majority ** *** assets ***** ** *** ******* ***** ** ******** ** ******** Therefore **** *** ****** crunch ****** *** ******* would ********** minimal losses ****** *********** this ******** The ******* *** ******* *** ***** ********* ** recover from *** ****** ** 2008 **** ** ******* the financial ********** ****** ** ****** and the ********** *** implemented ** ********* monetary ****** ****** Hancock ***** ******** *********** ********* **** international crunch ****** questions ** *** ******* ******* schemes *** ***** issue ********* included the ********* and ******** of ********* ********* ******* *** & ******* ****** ***** of ****** *** ********** to **** *********** mainly ** *** ****** The ****** include financial ********** *** ******* ************* financial engineering methods which **** ******* ** ******* ** ********* ***** and ****** ***** *** **** ******** ******* ******** *** ******** ****** ********* The majority of *** ******* ** *** ***** ******** ************ and *********** ** future ****** of the fundamental ****** ************ *** * ******** ** *** ********* *** market ***** ** these products **** not ** accurately *********** *********** ** *** **** ******* ****** 2008)The ****** ****** were results ** ********** *** misguided **** passed ** *** ****** participants ** the *** *** ******* who have continuously conquered *** market This ********* eventually *** ** the generation ** * ******* ****** ******** **** *** genuine ****** *** whose **** *** ***** ******* times the **** of *** ******* ****** *** ** *** ****** ******* **** ********* *** **** ******** ** ********** ** ******* ********* ** ****** ***** *** enhanced ** ******** ****** ********** ***** mainly ** **** transfer methods to ********* **** *** ***** *********** positions *** ***** ******* are *********** in ********** banksHow banks function *** why **** are fragileBanks employ *** use ** *** ********** ******* ****** in ***** ******* ** ****** ******** (Li ***** ******* ***** *** fractional ******* ****** *** ********* to be *** ********* ***** ****** globally ***** has ******* ********* from ********** ***** ** ********** **** ********* **** ****** ** *** ********** ***** *** ** *********** ** ***************** ****** *** money placed ** *** **** to *** ******* bank ** ******** to as high-powered money The banks *** ****** *** ***** using *** money ****** ** ******* since *** high-powered money is ******** ** * factor ** nine ********** ***** ****** 2011)The ******* ******** ** * ****** **** *** ***** **** ** *** **** ******* * ******* ** another bank *** vice ***** ** ******* ******* ** one thousand ******* *** allow the **** ** ****** *** ******** ** approximately *** hundred ******** ******* of ***** ** never *** (Mizen ***** ******* the *********** ** ******** people **** *** ********** ******* money *** ********** made ***** accounts *** * **** five ******* ** the ***** ** *********** *** ********* *********** ******* ** ******* **** ******* **** ***** ** ************ ** the ******* ******** **** ** returns ***** ******** when there are numerous injections and withdrawals **** *** **** ********** **** ******* **** ***** ******** ****** of **** and *** ** ******* ** spending ** saving the ***** ****** the ***** ** ****** ***** **** the circular flow ******** ** *** ****** ********** ** ********* ** *** ******** **** *** ******* ******** ****** ***** * ***** **** in **** **** ** ******** ****** *** people to begin ***** ********** and ***** **** ****** ********* 2011) * credit crunch affects the circular **** ** ****** *** banks ***** ** ******** *** ****** ** ***** ** circulation **** process affects trade ***** ****** will not **** ******** capital to ******** goods *** ************ Stearns **** company *** a **** ********** **** ********** dealer *** ********* ************ operating worldwide **** **** ****** ** *** York *** ************ had **** *********** *** ** ***** **** *** *** position ** subprime ********* *** assessed ** ********* *** ************ ********* ***** * ******** component ********** by *** investors *** the ******* ***** *** *** ***** of ****** (Mizen 2008) * ****** ***** **** ****** ** * *********** ** *** bank ** **** *** ******* ******* questions concerning subprime ***** ** a ************* **** ****** *** financial *********** had * ****** ** a ******* ******* **** willing ** ****** ** ***** *** ******* *** contended **** *** status ** an ************ ******** ** ***** **** a *********** ********** **** ********* *********** *** ******* *** *** ********* firms ** Wall ****** *** ***** Mizrach ***** ********** *** past *** ************ *** ********* *** *********** **** fact **** *** bank ****** several risky ********* *** ********** placed ******** ** ******* opportunistic ******* with slight ******* ********* ******** *** *** enacted ** **** ********* ********* holding banks ** take **** ** ******* *** ********** ********** ***** institutions *** **** ****** *** ********** to ****** in these ********** The new enactment **** *** ******* Reserve *** permission to ********* ********* ******* ***** ******* *** ********* did *** ******* guidelines *** *** *********** ** ********** ***** like **** ******* ********* **** ******* *** *** supervised ****** ** a ********** **** ******* *** enactment *** ***** ** the ****** ****** alone ***** ********* had *********** ** both types ** financial ************ *** ******** ****** ******** **** **** ********** *** holding ********* **** * supervisor ****** 2008) ***** **** Stearns *** ********** ** ****** ** *** ** ****** with *** *********** *** in *** ******* country In * *** ** ******* this requirement * voluntary ******* ******** ** ** *** *** *** ** ********* *** company However the program *** ******* ***** ************ and was **** endedDiscussion *** ************** of ******** *** **** Stearns  FrequencyPercentValid PercentCumulative PercentValidfailure ** * ***** ****************** ************************* ** ********* ** ********************************* *** bank ******** ** *** hedge ***** **** failed This *** ******* *** ***** reason the bank collapsed following *** onset ** *** financial ****** *** ***** **** ********* through *** ***** ********** *********** ** *** company The major **** *** the ********** ********** fund ** ********* ******* derivatives ********* by mortgages This fund *** ****** viable ****** *** ******* bubble After *** ******* **** **** **** *** leveraged ** ** times *** ******* ** the ******* ** the financial ****** became ******* *** two ***** ***** ** the investment **** **** This scenario ******** the **** ** ********* * ************** loan ** approximately ***** ***** *** ******* ******* *** bank *** also ******* talks **** ***** ***** ** ***** more ***** ** *** ***** ***** **** *** *** ***** **** ******** approximately *********** ** ********* ******* ****** ************** ********* *********** ** *** ****** ******** *********** *** ***** ******** **** * *** ** ***** ***** losing ********** that **** *************** *** ********** made wrong ********* **** *** ***** ***** fund ****** They ***** ** *** *** ** *** ********* ** ******** more funds ** ************* ***** existing **** **** ** a **** ineffective ****** of ********* money It entails * ********* ***** *** **** ******* to *** *** ** **** by acquiring **** debt *** ********** ***** *** ******** *** **** lenders ** ***** ***** ***** ** *** bank ** **** wait for *** ******* ******* ** *** ********* crisis ** **** off After *** ******* ** *** ********** ***** **** *** **** *********** ******* ********** ***** **** ** ************* ** billion *** ******* *** *** trust *** **** ******* with their ***** **** ** ******* **** suggested ** *** **** ** *** ***** money ** ***** *** loss that they *** created *** *** **** ******* *** loss was ** **** ** ******* ******* Since the ***** ***** not **** *** ***** ** *** *** of the **** the ********* ****** ********* ** **** their money *** ********** ****** ********** to *** collapse ** ****** Brothers’in **** ****** ******* **** **** ** **** Lehman brothers *** *** ***** stakeholders who ******** ***** funds ** *** bank *** ******* **** *** **** **** ** *** ******* but ****** *** whole ******* ********** *********** ******* ***** ********** of raisingfunds to ***** ***** **** ** the ************ *** ******** *********** ** * blow ** *** brothers Efforts ** ******* have **** in **** *** *** **** **** * ***** ******* *** ******** ** ***** stakeholder ** move away from *** **** *** **** ***** ***** ********** to ******* reduction ** ********* stability ** the bank **** ********** ****** *********** ********* ******** the ***** **** * ******* ** the ***** ****** was ******** *** step taken by ********* ****** shares across *** worldand move ** other financial secure ***** led to the ******** of * ****** ***** **** affected *** ********** ***** ******* in *** UK *** **** ** other ************* United ******************************** ****** ***** ********** ** ** *** Lehman bankLehman ******** *** ****** ** *** ***** **** ***** partners **** *** *** ***** ********** ********* ****** down their *** ** source more ***** ** ******* the bank ****** the ******* ** *** ***** ***** **** *** ******** ** ***************** **** *** ** *** ************* step ** **** ************* **** ***** stable ************* to gathered funds *** ********* its original ****** ******* *** **** **** *** ***** ** *** ** *** ******* *** ******* ********* ** *** ******* spite ** *** ****** ****** of ******* in *** ****** ******** **** **** ******** ******* has ******* the ***** ** ***** ***** ************ ** *** ********* ****** **** ***** more caution ** prevent **** ***** ** ****** ********** ************* ****** ** *** ******** of ****** Brothers’in 2008 severe ******* **** **** ** both ****** brothers *** *** other ************ *** invested ***** funds in *** **** *** ******* **** *** **** felt ** *** ******* *** ****** the whole worldAt ********** levelLehman ******* ***** ********** ** raisingfunds ** ***** ***** **** ** *** stakeholders *** ******** failurecame ** * **** to *** ******** ******* ** ******* have been ** **** *** the **** **** * ***** ******* *** decision ** other stakeholder ** move **** **** the **** *** **** other ***** translates ** ******* ********* of financial stability ** *** **** **** ********** Lehman brothers’ financial ******** *** ***** **** * ******* ** *** ***** ****** was ******** *** **** ***** ** investors ****** ****** across the ******** **** ** ***** ********* secure ***** *** to *** ******** ** a ****** ***** **** ******** the ********** bonds ******* ** the UK *** **** ** ***** ************* ****** ******************************** ****** ***** percentage ** ** *** ****** bankLehman ******** *** ****** to *** ***** **** ***** partners **** the *** ***** ********** ********* ****** down ***** *** to ****** more ***** ** ******* *** **** ****** *** ******* ** *** Dhabi ***** **** *** ******** ** ***************** Bank led ** *** organizations **** ** seek contributions **** other ****** ************* to ******** ***** *** ********* *** original ****** ******* *** fact that *** ***** ** one ** *** largest and richest ********* ** *** worldIn ***** ** the severe effect of ******* ** the ****** ******** **** **** ******** ******* *** ******* *** ***** ** ***** ***** ************ ** *** ********* ****** have taken more ******* ** ******* **** ***** ** ****** (Dumontaux 2013)Investors ****** *********** *** ************* ** the *************** ****** *** clear assurance **** ***** ************ to ********* ***** ********* ******* **** ****** *********** ********* **** ***** steps forward ** withdraw ******* their *********** **** ****** ***** ***** ******** is *************** ******* ** debt ******* *** solely **** ** ***** hedge funds and ********* ********* which ******* ********* ******* to **** ******* Markets ** **** items has a ********* **** raising ***** ***** ** a ****** ** crucialbefore sourcing support **** ***** source *** funds *** ** raised ** selling ******** *********** ** borrowing **** partners ********* to ********* ****** **** **** ****** the ****** ******* of ********* in *** **** ******* *********** ** the funds ******* asmuch as ******* ** ********** *** be *** ****** *********** of ****** funds ******* ** it easy ** ***** ***** through this ************ borrowing from other *********** ****** *********** ***************** ** reluctanceof financial ************** inject more resources such ** ***** ** boost the ****** According ** ************* ****** negative ******** *** ******** ** the ***** ****** ** * ****** of affecting ********* ******* ******* total **** ***** across *** assets ******* for banks *** insurers *** **** ******* ** ******** ** global financial ****** ** ******* 2008 ************** ***** *** ****** ** ***** losses included ********* **** ****** **** ****** ***** which ******* ******** *** financial ********** ** loans ** well ** ************** * *********** ** ***** ******* *********** ** debt ****** ******** ******** ************* ********* will ******** ** regain *** ****** **** *** ** ******** If ************ ***** ******* back ***** ********** stakeholders *** be ******** ***** interest ***** to ****** partnersQuestion **** ***** ** *** of *** ******** ********* of ************** **** ** **** earlier was ****** hit ** ****** ***** ******** Further ********** actins *** ** be ***** ** ********* *** ********* ** ********* in the ******* *** Dhabisorted *** ********* boost **** ******** partners like *** insurance ******* ** **** bring its ********* ********* ** ******* *** **** *** invited billions of ************* LehmanBrothers **** ***** **** ***** ** future bankruptcy *** ********** of *** ******* had ****** ******* to ******** ***** **** ******* off ****** ******** **** **** serious crisis *** look *** possible ****** **** ** ********** low ********* **** *** Dhabi Companyrealizes at this **** ** *** crisis led to signs ** ******** in *** *********** ********** With **** ****** ***** ******** ** *** ********* ****** ******* *** shift *** *********** their efforts to boost ******** ****** rumors ******* ***** *** not ******** ****** ******** ** regarding to the ******** condition ** *************** ******* ***** **** ***** **** ** *** and gather *** *********** **** *** company *** ***** ********** were *** successesUp ** *** **** **** Lehman bank was investigated *** * report ********* ** ******* ********* ********** bodies *********** *** ******* its *** ****** concerning *** **** **** ** money **** ** the ****** ******** ******* chief executive **** this *********** as ********* *** *********** would lead ** *********** the *********** ********* ****** *** risk of **************** crisishit the world **** ***** ** *** fact that it ***** threats to *** ***** financial ****** *** ******* *** result ** loss ** ********* **** lost trust ** **** **************** ******* ** ****** due to ******** natures ** ****** ********* institutions Question ****** ** ******** *** ********* INSTITUTIONS ****** *** ****** ******** *** ******** *** *********** of ***** banks ** *** ****** ****** ******* *** ********** have ********* *** regulation ** financial ******* banks Since **** ******* *** an ********** **** ** *** ** ******** *********** body As * ****** *** **** could ****** ** high risky endeavors *** *** *** **** ** ******* ***** ******* ** coordinated *********** ** the ***** ****** *** bank *********** ******** ******* **** ********* **** poor ****** ********* **** granted ***** **** **** ***** *** ***** ** **** **** ******* with *** ****** the ******** ** people ***** ****** ******** banking ** it ***** **** ******* ******** and ****** **** **** could *** acquire with ***** ***** ** income For ******** ******** ******** ******* ********* ** ******* ****** that *** out ** ***** price ***** ***** **** ****** ***** **** ** *** *** **** **** possible *** ** * situation **** prefer ******** ******* ******* ****** **** considerations *** ******** ******* of the ******* ***** **** ******* *** ** in a ********* **** they *** ****** to repay ***** ***** ** *** bank Causes ** the ********* ******************************* ***************** PercentValidcredit *********************** ********************** ******* *** ******************************** and ********* ***************************** ******************************************************************************* The ****** ****** started ** *** 1990s **** ***** ********* **** and ****** *** ******* ** ******* *** ****** This ****** *** ******** **** ** **** * ****** **** ****** in ******* *** Europe ********* mortgages ************* this ******** The ******** ****** ** the ****** ****** ******** *** ****** **** Increases ** house prices ************* *** ******* bubble **** ****** ********* ******** ****** *** ********* *** ********* Letdown ** ****** ******* *** securitization ******* *** ********* **** ********** ********* assets ******** organizations reduced the ****** value ** the ********* **** ******* Credit ****** organizations ************ ****** *************** securities ***** factors enhanced *** generation ** **** *** ********* ******* ** ***** ********* ************ ******** **** intense ******* **** by holding small ******* ******** to *** ***** **** ********* on their balance ****** *** majority placed ***** ************* ** **** ****** ** depending ******* on ********* ********* ** the repo *** profitable ***** ******* *** their ******** ********* Organizations were ************ clear regarding ******* risks ********** ***** in ******* **** made ** **** *** **** ** ****** ***** ********** and ********* **** required How *** ******** ** **** *** Stearns ***** **** **** ******************************** PercentCumulative ******************* ******* ** **** **** mortgage6300316316regulated *** asset *** ********* ************************** ******* ******** and ********************************************************************** *** ********** bank should **** stopped ******* on ********* mortgage **** ****** ** ********* ** ********** ***** since ** ******** ******* ******* ** *** long *** ******* *** risk involved ** ***** *** can ****** ** * situation where numerous ******* are ****** ** pay their mortgage *** **** ****** have ****** ********* *** asset to ********* mismatch At a time **** *** ******* ***** *** ********** ****** worth *** ******* dollars *** company *** only ** billion ******* ** assets ** cash **** *** variation is *** of *** ***** reasons that resulted ** the ******** ** *** bank Therefore *** bank ****** have reduced this *** by ******* ********* ******** rates *** **** ****** **** ******* ******* leveraging *** ***** **** ** ******* this process led ** *** **** ** *********** ****** ** *** *************** Bear and ******* collapsed *** to ***** ********* made ** the management The ********** implemented wrong policies and persisted **** **** **** **** **** showed signs of ******* *** instance when *** ********** ***** fund ****** *** ********** insisted ** developing an ******** ***** **** **** also ***** *** ********* ** *** their ***** stay ** **** ***** *** situation to **** ***** ******** ** the ******* sector have a huge ****** **** *** ****** the ******* experienced when * ********* crisis occurs or worsen *** ******* ********* *** management should ensure that they make ******* ********* *** ********* ********* ******** This process *** ** achieved ** ********** ********* ************* research **** ****** **** ****** that *** ******* *********** ***** correct ********* **** **** ****** ** ********* ****************************** HancockD ***** ********* (2010) The bank ******* ******* ** ******** ****** *** its effect ** ******** ********************* ****** *********** the Liquidity and ****** ****** ********* ******* ** Economic ************ *************************** ***** LetherbyG ****** ************ to the ***** ******** on *** Current ********* Crisis/'Credit ******* ************ ******** ****** ************************* (2009) Structural ****** ** *** global ********* ******* * critical ********** ** *** ****** financial *************** ********* ******* ** Economics ******************************* ***** *********** (2010) The ******* ******* of *** ******** Crisis: **** *** **************** ****** ******* and *** ************ ** ****** CrunchesHolmbergU ****** *** Credit ****** and *** ************ ** ****** ********* ** Agent ***** ******** *********** & ******** (2010) **** return analysis of Bear ******** credit ******* ***** Economic Modelling ********************************** ****** *** ****** ****** ** ********** * discussion ** *** ********** ****** reactions *** ****** ******************** ***** ******** (2011) ******* ******** ** ******** ********* ** ***** ***** nonlocal banks and ************ in *** *********** *************** * ****** *** Debt Markets **** ************* ** *** ****** ******* ** ******** ************ ************* N ****** ********* effects ** *** ********* ** Lehman's collapse ******** **** the ** ********* services ******** Paris: ****** ** FranceLehman Brothers’ ********** ****** ******* learned *** *** ********* Informational ************ *** *** clients ******************

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