Question

After listening to an NPR " This American Life" about the most recent financial crisis please answer the following thank you!

What are the sequence of steps that lead to the present financial problems?
Who is to blame?
What have we learnt?
What steps have we taken to avoid this happening again?
What regulations should be introduced to curtail these sorts of problems?
How has this affected us as individuals?

Answer 1

The sequence of steps was that people were rewarded for taking too much risk. This lead to dilution of risk management on the premise that asset prices would continue to rise forever. However when prices of assets fell, the investors lost lot of money.

The culture of too much risk taking and looking at only short term profits is to blame for this systemic failure.

We have learnt that being too greedy can never end we'll both for individuals and corporations.

The steps that have been taken are that derivatives are now closely monitored and also bank leverages are now controlled so as to prevent the kind of meltdown seen during 2008-09.

Regulators should ensure that corporations and investors should have adequate risk management framework in place to prevent loss of capital and also protect retail investors's interest.

The crisis has made us more wary of the financial services sector and we now have become skeptical of investment products marketed by banks.