Wall Street Crisis

408002216 | Lessons from the Wall Street Crisis | Reasons for Risky Behavior of Financial Traders | | | 11/23/2012 |

This paper seeks to assess the persistent risky behavior by financial traders and lessons from the Wall Street crisis. |

Introduction

The tropical storm began in 2007 when two hedge funds who invested in assets guaranteed by subprime loans needed to sell $3.8 billion of obligations. Within minutes one of the most important banks on Wall Street was forced to sell itself to JP Morgan Chase at $2 per share, when in the prior 48 hours it was valued at $30 per share. (Marazzi 2011) By 2008 a snowball of bankruptcies occurred in the United States of America. Major institutions such as Freddie Mac, AIG, Lehman Brothers, Bank of America, and Fannie Mae collapsed. Tenants of globalization such as capital mobility, ideology such as neo-liberalism, and financialization facilitated the global domino effect of the crisis. In 2008 the Wall Street crisis was global and was knighted the “crisis of crises…of a violent finance”. It is a systematic crisis which collapsed under the pressures of its own contradictions, it can be said to question the very limits of capitalism. (Marazzi 2011)
There are vast explanations accounting for the Wall Street Crisis, it is disputable whether it was caused by state or the market fault, although evidence have shown that both played critical roles. ("Development-led globalization: Towards sustainable and inclusive development paths" 2011) This paper will illuminate the vibrant financial innovations, financial operations, and new national market policy which have been mainstreamed by Anglo-American globalization and access the persistent risky behavior by financial traders.

Financialization
The term financialization has numerous definitions. Some define financialization as representing the explosion of financial trading with a myriad of new financial instruments. (Epstein 1998) Krippner believes

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