causes of financial crisis

Topics: Futures contract, Credit rating, Debt Pages: 1 (481 words) Published: November 29, 2014
Causes of Financial Crisis
There were many antecedents of financial crises that led to the Global Economic Disruption. Many pundits consider Financial Crisis as the cyclic event that recurs after passage of certain interval in Economic Lifecycle, but they should consider it only wrongs by the side of human intellectuals. Institutions are made up of human beings or human resource. In order to cater with the rapid changing in the financial engineering in the overall Global Financial Market human resource working for regulatory institutions should be more vigilant than before in reviewing any misappropriation in the Financial Market marred by institutions and individuals which exploit the opportunities and needs of the market. Global Financial Institutions like IMF,WorldBank devise policies which usually benefit only North of the Globe, but their more prudent way of exploiting in way of introduction of financial engineering led the whole north to remorse. Somehow Governmental reliefs lead to the Financial Crisis as was the case of Gramm Leach Bliley Act (GLBA) and Commodity Futures Modernization Act (CFMA) were introduced in order to provide instrument managers to trade in risky instruments used for Futures trading and diversifying risk over more volatile and futile paper money that deteriorates with no underlying assets. This feature of no underlying asset dragged the whole financial structure of financial market to debacle and worst upheaval in the history of World Economics. Haphazard lending of loans and mortgages of houses combined with increase low interest rates turned the low-income people yield less. This induced investors to take loans in order to operate abundant capital which had remained dormant just because of no opportunity to invest. Because interest rates were low just increase the value of the market of houses. Mortgages of houses were issued without contemplating the creditworthiness of borrowers. When Borrowers defaulted, all those who were...
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