SUB PRIME CRISIS
Causes of sub-prime crisis
Thesis
The sub-prime crisis was a string of episodes and conditions that caused a global economy meltdown thus, resulting in recession across the world. This is largely caused by the deregulation of the financial markets undertaken by the United States government starting in the late 1970s. The main thesis of this paper is that, although there are countless factors and parties that attributed to the massive economy downturn, most of the policy exploitations can be linked to just a few major parties. The main causes of the sub-prime crisis too, can be narrowed down just 3 main points. In this paper, I will discuss about why and how deregulation of the financial market, unethical behavior of financial institutes and the greedy American citizens attributed to the crisis. I have also identified the United States Government, financial institutes and the greedy American citizens as the major parties that were responsible for the global economic meltdown, which showed it’s full prowess in year 2008 and 2009.
Sub-prime lending
1. The way banks lent money
-Loans are easy to acquire due to the changes. (banks used to only loan money to people with a good credit score but now they lend money to anyone)
That resulted in sub prime loans.
-banks come up with policies to entice more people to take up loans with them
i.e. ARM banks also came up with ways to discourage early repayment by enforcing an early repayment penalty (??)
The sub-prime crisis is mostly caused by the changes in the way banks loan
People
the ease of acquiring money led to undisciplined spending which goes on further to affect home prices while income of people stayed the same.
Impulsive shopping
Excessive use of credit cards
Buying cars/houses that they cant afford
Thesis
The sub-prime crisis was a string of episodes and conditions that caused a global economy meltdown thus, resulting in recession across the world. This is largely caused by the deregulation of the financial markets undertaken by the United States government starting in the late 1970s. The main thesis of this paper is that, although there are countless factors and parties that attributed to the massive economy downturn, most of the policy exploitations can be linked to just a few major parties. The main causes of the sub-prime crisis too, can be narrowed down just 3 main points. In this paper, I will discuss about why and how deregulation of the financial market, unethical behavior of financial institutes and the greedy American citizens attributed to the crisis. I have also identified the United States Government, financial institutes and the greedy American citizens as the major parties that were responsible for the global economic meltdown, which showed it’s full prowess in year 2008 and 2009.
Sub-prime lending
1. The way banks lent money
-Loans are easy to acquire due to the changes. (banks used to only loan money to people with a good credit score but now they lend money to anyone)
That resulted in sub prime loans.
-banks come up with policies to entice more people to take up loans with them
i.e. ARM banks also came up with ways to discourage early repayment by enforcing an early repayment penalty (??)
The sub-prime crisis is mostly caused by the changes in the way banks loan
People
the ease of acquiring money led to undisciplined spending which goes on further to affect home prices while income of people stayed the same.
Impulsive shopping
Excessive use of credit cards
Buying cars/houses that they cant afford