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In: Economics

There are a number of reasons for the 2007-2009 financial crisis on Wall Street. Research that...

There are a number of reasons for the 2007-2009 financial crisis on Wall Street. Research that time period, and summarize the three key issues that caused this crisis.

Finally, what things are in place to keep this from happening again?

What would need to happen today to cause another financial crisis like this recent one or anyone from the past?

Solutions

Expert Solution

The financial crisis of 2007-09 was primarily due to the deregulation in the financial sector. Lower of interest rate by federal reserve makes money more cheap. Subprime borrowers were able to get cheaper loans without any solid collateral leads to subprime lending crisis. The borrowers were not in a position to repay the loans.Unregulated markets and corporate accounts scandals coupled with lower government intervention fuelled the crisis.
Subprime borrowers were filling for bankruptcy, aggravated the situation.

These things may prevent or help economy from another recession. The mortgage brokers should be regulated and strong collateral security for availing loans.
The financial market should be regulated in order to avoid fluctuations in the market. Over consumerism in the country should not be encouraged. The economy should strengthen the monetary authority, so as to make growth oriented monetary policies.The nexus between corporates and banks must be avoided. The essence free market economy along with government control is essential to prevent crisis.

Rahul Sunny answered 1 year ago
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