Margin Call
Student Name: Ahmed Othman
Professor Watnik
Management 306
12/05/2012
Margin Call
In 2008, an economic hurricane hit the world. The origin of that hit was the United States. Many countries were affected by that hit. Including a rich spot like Saudi Arabia and the United Arab Emirates. I have experienced, while I was working at Emaar Saudi Arabia branch, that the real estate market in the gulf region was damaged as no one would invest in the market at that time, and the prices declined sharply. There were a huge number of layoffs that I witness happened to my colleagues. That was what happened in countries far away from the United States, where the situation was much worse. People did not just lost their jobs in United States, they lost their homes, savings and retirement plans as well. All these big losses started with three stages: greed, more greed, and investors panic. It was greed of the brokers and house mortgagee, houses end users, individual investors, and stock and securities traders that caused this problem. The end user wants a house that they cannot afford. The brokers and house mortgagee were only concerned to gain more money from the fee and did not check the credit history of the potential house byers carfully. Individual investors who bought houses that they could not afford only to resell these houses and gain quick money, since the demand was high and the prices kept going up. Stock and securities traders who only cared to buy and sell securities to gain money without proper calculations for risk, since all of them were profiting from that demand. Moreover, the increase of real estate demand unlashed the greed to its maximum. According to Rayan Guina founder and editor of Cash Money Life, and auther of "The 2008-2009 Financial Crisis – Causes and Effects" that financial institutions such as mortgage brokers started to give high risk loans to people, who wants to buy a property. These firms did not manage the riskiness
Professor Watnik
Management 306
12/05/2012
Margin Call
In 2008, an economic hurricane hit the world. The origin of that hit was the United States. Many countries were affected by that hit. Including a rich spot like Saudi Arabia and the United Arab Emirates. I have experienced, while I was working at Emaar Saudi Arabia branch, that the real estate market in the gulf region was damaged as no one would invest in the market at that time, and the prices declined sharply. There were a huge number of layoffs that I witness happened to my colleagues. That was what happened in countries far away from the United States, where the situation was much worse. People did not just lost their jobs in United States, they lost their homes, savings and retirement plans as well. All these big losses started with three stages: greed, more greed, and investors panic. It was greed of the brokers and house mortgagee, houses end users, individual investors, and stock and securities traders that caused this problem. The end user wants a house that they cannot afford. The brokers and house mortgagee were only concerned to gain more money from the fee and did not check the credit history of the potential house byers carfully. Individual investors who bought houses that they could not afford only to resell these houses and gain quick money, since the demand was high and the prices kept going up. Stock and securities traders who only cared to buy and sell securities to gain money without proper calculations for risk, since all of them were profiting from that demand. Moreover, the increase of real estate demand unlashed the greed to its maximum. According to Rayan Guina founder and editor of Cash Money Life, and auther of "The 2008-2009 Financial Crisis – Causes and Effects" that financial institutions such as mortgage brokers started to give high risk loans to people, who wants to buy a property. These firms did not manage the riskiness
Cited: 1-Amadeo, Kimberly. " Follow the Timeline to Understand Why It Crashed" Useconomy.About.com, http://useconomy.about.com/od/Financial-Crisis/a/Stock-Market-Crash-2008.htm, Updated June 09, 2012. 2-Butrica, Smith, and Eric Toder. " What the 2008 Stock Market Crash Means for Retirement Security" Urban Institute, http://www.urban.org/publications/411876.html. April 01, 2009. 3-Econmesit View http://economistsview.typepad.com/economistsview/2008/10/what-caused-the.html. October 04, 2008. 4-Guina, Rayan " The 2008-2009 Financial Crisis – Causes and Effects" cashmoneylife.com, http://cashmoneylife.com/economic-financial-crisis-2008-causes. updated December 29, 2011. 5- Margin Call. Dir. J. C. Chandor. Perf. Kevin Spacey. Roadside Attractions, 2011. DVD. 6- "Stock Market Crash of 2008" Money-Zane.com, http://www.money-zine.com/Investing/Stocks/Stock-Market-Crash-of-2008 (Novamber 20, 2012). 7-Soto, Mauricio. "How Is the Financial Crisis Affecting Retirement Savings?" Urban Institute. http://www.urban.org/publications/901206.html. December 10, 2008.