Financial Crisis 2008, Causes and Consequences
Alegría Valeria, Salazar Saúl
The 2008
financial crisis cost millions of people their savings, jobs and homes, which
was unleashed due to the collapse of the housing bubble in the United States,
affecting not only this country, but also several countries around the world,
thus producing one of the worst global crises in history.
The main cause
of the global crisis was the granting of subprime mortgages, which were very
well received by people. Given this problem, this paper seeks to explain the
causes and consequences of the crisis.
After the Great
Depression, the United States experienced 40 years of economic growth without
going through any financial crisis. In 1980, the financial industry was
transformed. The investment banks gave access to their capital to all types of
investors; from this, the American financial industry suffered a period of
deregulation, boosting salaries only in this sector.
At the end of
the 90s, the financial sector would have consolidated into a few large firms of
such a size that its collapse could threaten the entire system. The main
authors of this crisis were investment banks, risk rating agencies, insurers
and speculators.
Investment banks
granted subprime mortgages, which are subprime mortgages, which were granted to
customers with a high probability of default. In addition, these banks used
debt instruments called CDOs, which were mortgage-backed, where the investor
buying a CDO bears the credit risk of the collateral.
During the
credit bubble, investment banks used CDOs to combine debt issues of different
quality, from risk-free products to subprime mortgages of the worst credit
quality.
On the other
hand, risk rating agencies dared to rate investment banks and their financial
products with high credit quality, even though they knew about the amount of
junk financial products they issued.
As for the
insurance agencies, they granted CDSs, which are credit default swaps, to the
owners of CDOs, where the CDS buyer pays a premium and in exchange receives a
sum of money, if the event of non-payment included in the contract occurs.
The trigger that
would mark the beginning of the financial crisis was the fall of Lehaman
Brothers and the bankruptcy of the insurance company AIG, however, the latter
was rescued by the U.S. government. At the end of 2008, the financial crisis
exploded; lenders could no longer sell their garbage mortgages, as the holders
of those mortgages stopped paying as they lost their jobs, causing a drastic
fall in the price of housing.
The misuse of
financial instruments by investment banks; the poor ethics that risk rating
agencies had at the time of giving ratings to financial products when they did
not deserve them, and this added to the greed of these characters, caused one
of the greatest financial crises, which took with it the savings, homes and
jobs of millions of people.
At the time of
the 2008 crisis, Ecuador was isolated from international financial markets
because it had entered into a moratorium on external debt. Thanks to this, the
country was not infected by the same mechanism as the rest of Latin America;
however, the country was affected by the fall in the price of oil from late
2008 to mid-2009. If we compare the years between 2008 and 2010, Ecuador was
the second economy to grow the least in South America.
Having explained
the antecedents and consequences of the crisis, we thought if those responsible
for this whole catastrophe had seen beyond their personal interests and had
used all their knowledge and skills to seek mutual benefit, this crisis would
have been avoided.
I agree that the crisis arose in 2008, due to the fall of US investment banks due to the subprime mortgage crisis, which represented a high percentage of their investment, stock exchanges and stock markets collapsed and the crisis occurred since the most important element of finance that is the trust in mortgage loans was lost. But the first symptoms of this crisis was in August 2007 with the bankruptcy of several smaller investment banks and the trigger was the fall of the US bank Lehman Brothers. Although governments had to make numerous financial bailouts to save financial and non-financial companies from a probable bankruptcy, the crisis also became a debt crisis in different countries, especially those in the eurozone. Due to the large amount of money allocated to financial bailouts and the sharp general fall in income from tax collection, some governments carried out economic austerity programs that implied strong social cuts causing social responses and an increase in widespread poverty in large numbers from countries of the world.
ReplyDeleteHowever, I do not agree that Ecuador, despite having been isolated from the financial markets, only had effects on the price of oil because it also had an impact on remittances since there was a collapse in the volume of remittances this is due to the fall of the employment in the services and construction sectors where most Ecuadorian emigrants were employed.
The 2008 financial crisis is the worst economic disaster since the Great Depression of 1929. The principal cause of this problem was that there were too many homeowners with questionable credit, and within a matter of months, the investment bank, Lehman Brothers, collapsed from having taken on too much risk, that predominated in the housing market. This financial crisis, that caused solvency problems in mortgage loans in certain cities in the United States, judged different points, like the rationality of individuals and efficiency of markets. I agree with that the after regulation, the causes of the crisis were irrational beliefs (on house prices or risk) and corrupt incentives (fraud in mortgages and credit rating agencies). Ecuador had a slow recovery after the financial crisis of 2008 with relatively poor economic growth with the decrease in the price of oil, the decrease in international prices of commodities and the global credit crisis that affected the Ecuadorian economy. According with the Central Bank of Ecuador, GDP fell 1.5 percent between 2008 and 2009, then the sectors mining and domestic service showed a permanent decline from the beginning of 2008 until the end of 2009. Considered the manufactures, the sectors that showed the greatest decreases were: processed sugar, coffee and tea, electrical machinery and textiles. Furthermore, Ecuadorian international trade was strongly affected both by the crisis and by the specific decrease in the international price of oil, and imports decreased by 18 percent in 2008.
ReplyDeleteEvidently, the financial crisis of 2008 was a consequence of a series of failures and irresponsibilities by the State and risk rating agencies such as Moody's, S&P and Fitch, which certainly made up the oligopoly of private financial rating agencies. Well, it is important to mention that since the 80’s and with the hand of President Ronald Reagan, the financial industry suffers a long period of deregulation and thus excessive salaries in this sector.
ReplyDeleteAt this point it is important to highlight that the financial system was flooded with high-risk financial products and by 2006 everyone could access to buy a house since mortgages were granted regardless of risk, before this the price of housing soared . However, I consider that these were not real benefits, they were not real income, it was simply money created by the system. By the end of 2008, the financial crisis was exploding and lenders could no longer sell their mortgages delivered to investment banks.
At this point it is essential to analyze the level of credit risk, as there are two important actions such as transaction risk, which had to be analyzed in 2006 before granting loans and portfolio risk through the follow-up of default to those people that the credits have already been delivered, in this way it was not evaluated in a responsible and conscious way.
I consider that the financial risk was not analyzed under the concepts of liquidity risk and market risk because the fall of Lehman Brothers, involved a cost of 22 billion dollars to the US economy, due to its illiquidity and insolvency and exposed how Financial markets had depended on subprime mortgages, and their derivatives. As one of its main consequences, emerging economies began to slow down in 2009 to 2.8% per year, according to the International Monetary Fund (IMF). Which implied a higher unemployment rate, in this way people could not meet their short-term obligations, forcing them to vacate their homes, homes that could not be sold in the short term. In this way the market risk is evident, since Credit Default Swaps, as a bilateral contract between a buyer and a protection seller, begin to generate losses due to non-payment of obligations, resulting from high unemployment and bankruptcy rates. of the banks. In the same sense, operational risk and legal risk are immersed in this situation, since the main responsibility falls on the financial risk rating agencies, because they irresponsibly rated AAA high-risk financial instruments such as Credit Default Swaps, a fact repudiable by society.
Finally, I consider the people to be victims and vulnerable to this situation, because how many citizens found themselves overnight with a major mortgage debt? How many millions of people lost their jobs?
The 2008 financial crisis was a complex and multidimensional situation. Although the origins of the crisis were strongly related to the granting of subprime mortgages, other determining factors are also identified: the deregulation of the financial markets, the design of new financial instruments that were not totally regulated, ethical problems of the actors of the financial and regulatory sector and obviously, the interaction between some entities (investment banks, financial conglomerates, insurance companies and risk rating agencies) that driven by their personal economic interests gave rise to this special event.
ReplyDeleteThe consequences produced by financial crisis were not only economic also were social. People lost their jobs and had fallen into poverty. On the other hand, Ecuador had a strong impact of the crisis through various transmission channels that acted as external sources of financing for a rigid and dollarized economy, and vulnerable in the external sector. These channels were: falling oil prices, falling remittances as a result of the destruction of migrant employment, the restriction of access to international credit and, to a lesser extent, the slowdown in Foreign Direct Investment.
Finally, I think the government role was totally mistaken, they did not supervise and monitor the financial experts and their institutions to constantly make sure they are in alignment with the regulatory systems. Additionally, too many loans were issued on a risky basis to unqualified customers that were not creditworthy, and the government fully aware of this encouraged and kept on pumping money into circulation for their political gain and this situation generated prejudices to a lot of people.
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ReplyDeleteThe financial crisis had several backgrounds such as the bankruptcy of Lehman Brothers Bank where it had many losses due to the inability to collect mortgages and the abrupt devaluation of real estate. In addition, in countries such as the United States and the European Union, banking institutions had mergers and safeguards. In contrast, liquidity restrictions on loans and investment packages were met in Japan. In the mortgage market there were imbalances as a result affect the financial market and the real economy. This even causes credit instruments, securities and shares to have a reduction in the value of assets. On the stock exchange, capital movements declined and so did the decline in speculative demand, where it spread rapidly to emerging markets.
ReplyDeleteEcuador was one of the countries most affected, especially as it had a slow recovery, because it was isolated from international financial markets. It had entered into a moratorium on foreign debt. Its effect was the fall in the price of oil. All these events caused the decline in consumption, production and employment then, which harmed large productive companies, provoke a greater dismissal of their workers.
I agree, the financial crisis of 2008 began with a real estate crisis but was caused by the monetary policy applied by the United States government such as: deregulation of financial markets (interest rates was lowed, the fixed mortgage rate for 30 low years) and investment banks began with the granting of high risk mortgages (suprime), to this it is added that the directors of credit institutions and regulatory entities acted under their own economic interest.
ReplyDeleteThis was a global problem , because it affects all economies in different ways, since the United States has a close connection with other economies in financial, trade and investment. For example: the reduction in demand from the US affected imports from China, Japan, South Korea, Canada and Mexico. Focusing on the Ecuadorian case, it is true that he was isolated from the financial markets due to the moratorium on external debt, however, Ecuador's economy was also affected as its exports of primary goods were reduced from $ 14.3 million to 10 , 52 million dollars between 2008 and 2009, according to statistics from the Central Bank of Ecuador.
It is worth asking why the US authorities did not issue any regulations in this regard, especially considering that since the 1990s the Government Accountability Office (GAO) - the body of legislative power that audits, evaluates and investigates, had already predicted and identified "significant gaps and deficiencies" in the supervision of these financial instruments. On the other hand, Paul Krugman and Joseph Stiglitz have two economists awarded the Nobel Prize in economics, they had already predicted the crisis over and over again, at least since 2004, but the administration of President Bush disregarded calls for caution and practically ignored his warnings. Therefore, in some way or another, measures could have been taken before and with the help of greater transparency in the management of large financial companies, the crisis could have been avoided.
ReplyDeleteThe 2008 financial crisis had devastating results for workers, countries,and economies world wide. While it was banks, lax financial regulation, growing inequality and debt, and deregulation that led to the crisis, it was workers and citizens that suffered. Be it throught the government bailouts that promtpedthe enactment austerity measures such as reduced social spending and the reductions in welfare, or increases in unemployment, it was not individuals or the institutions that caused the crisis that suffered the effects of the aftermath.
ReplyDeleteThe immediate trigger for the financial crisis of 2008 was a combination of speculative activity in financial markets, focusing particularly on property transactions. There were large-scale loans to finance what appeared to be a one-way bet on rising real estate prices. But the boom was ultimately unsustainable because, from around 2005, the gap between income and debt began to expand. This was led to an increase in the rate of global inflation. Caused a substantial reduction in capital borrowers, many of whom struggled to pay mortgages. The property prices started falling now, which led to a collapse in asset values held by many financial institutions. US banking sectors. UU.
As expected, the effects of the crisis are deeper and last longer when it is expected that the reassessment of risk by businesses and households, this leads to lending to risky ratings to customers who could not afford to debt, which should be regulated by the state and regulators.
The financial crisis originating in the United States stock market is a great example of how deregulation, together with the monopolization of large companies, can affect the entire planet economically and financially.
ReplyDeleteThe failure of the state to intervene in the economy means that the markets regulate themselves, but this leads to market failures. The exclusive exercise by some companies such as financial conglomerates, insurance companies and risk-rating companies during the crisis is a representation of this. Personal and corporate interests also played a key role, granting mortgages and risky loans in return for higher profitability led to loss of individuals' assets, increased unemployment and poverty. The United States with a strategy to safeguard its financial market, rescues one of the largest banks, in turn, reduces imports and gets its output delocalized and tertiary, in this way, dependence on other countries in this nation; also contagion to the rest of the regions.
For Ecuador, one of the countries with the least developed financial market, it had an impact on its trade balance. As a primary exporter and with its main trading partner in financial crisis, foreign exchange inflows were reduced.
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ReplyDeleteThe rapid evolution that caused the financial crisis in the United States and its contagion to the rest of the world's economies has led analysts and politicians to discuss and plan solutions to recover the growth and well-being of the thousands affected. Crisis that was caused by excess liquidity and inadequate regulation of an integrated international financial system has placed the world economy on the verge of recession. In addition, the unilateral actions that the different governments adopted at the beginning highlighted the difficulty of coordination in a multipolar economic world without clear leadership. Fortunately, rescue packages have been approved and, under British leadership, a consensus seems to have been forged on the need to recapitalize the banking system and secure interbank deposits and loans. However, there are still important challenges on how to establish a shared leadership to provide better rules for financial globalization.
ReplyDeleteOne of the main lessons that can be obtained from this crisis is that the economic authorities in the initial moments lack the necessary information to know the scope of the problem, underestimating the magnitude of the problem, establishing important challenges on how to manage a shared leadership to provide from better rules to financial globalization.
Finally, it can be said that history remains an instrument of analysis in order not to repeat it again in the future, as well as for the behavior of investors, consumers and banks. The new instruments that have been developed from the economic analysis will have to be applied in due course.
The Extended International Panorama
ReplyDeleteTo solve the inconveniences caused by the financial crisis, conventional and unconventional measures were taken, these types of measures were adopted by governments around the world.
The political behavior of several countries was reflected in the type of measures used to combat the effects of the crisis, for example, provide liquidity to financial institutions by the support of Central Banks to rehabilitate the interbank market. Although the financial indexes indicated a fall in the values of the CDO's, the trigger broke out when Lehman Brothers declared bankruptcy, Bear Morgan was acquired by JP Morgan Chase, Merrill Lynch was sold to the Bank of America and Fannie Mae and Freddie Mac remained under the control of the US federal government. UU.
The Times of crisis the trust is generated, the main learnigns about financial crisis is that the confidence of the financial market is fragile and cannot be restored quickly even using policies that promote it. An apparent liquidity crisis in the world's largest banks can quickly become a solvency crisis for many financial institutions and a crisis of confidence for the entire world as a result of globalization. The positive side to each past crisis is that markets strengthen and create new beginnings.
Ricardo Flores Bedón
ReplyDeleteWith regard to the financial crisis in Wall Street, it should be taken into consideration that most of the market agents had an influence to create the financial bubble, starting with the deregulation of the government with the rules established for banks and their implications With the stock exchange.
While banks made loans to buy homes that were overvalued more flexible, control agencies did not pay attention to insurance rating agencies, which maintained a positive rating on loans that were unsustainable. Real estate agents, in turn, that the value of the houses double or raise their value much more than their real price in the market, causing that the debts contracted by the citizens, do not cover the total amount of their loan in the case of They couldn't pay
Although it was possible to get out of a crisis with the actions of the government at the time of solving the largest US banks that were submerged in this crisis, it was not completely overcome, because it was only covered with an inorganic issuance of money, which allowed to have apparent stability, leaving many of the officials who allowed deregulation of the market still financed in their posts.
i think that everybank should give credits with financial backings and enoght security for reduce the risk, because always there are some people looking win more money and do not measure the consequences , for example the crisis finance in 2008 there were people that won million for buy and sell finance instument because they knew that some finance instuments didnt work and they made another finance instument for it recive money from insurers.
ReplyDeleteThe financial market crisis revealed to what extent the selfishness and greed of bankers, stockbrokers, credit rating agencies and financial institutions caused macroeconomic distortions. The high frequency stock trading algorithms do not care a bit for reality. All they are interested in are the stock quotes that were calculated a nanosecond ago. Therefore, apart from all macroeconomic fundamentals, speculators move the goods, labor and capital markets like a toy. Instead of functioning as the lubricant of the real economy and ensuring that market transactions run smoothly, financial markets are burning the fire in the fires of the global economy.
By: Marjorie Salas Jiménez
ReplyDeleteIn the 2008 crisis, the main problem was that mortgage loans had been negotiated in financial markets around the world, which is why a crisis that began with mortgage loans in the US it infected the other sectors of the economy and the other countries of the world: at the end of 2008 there was a violent reduction of credit across the planet that caused the contraction of many economies.
The crisis began to be felt in Ecuador, first as an effect of the external crisis, in four main income sectors in the country.
- 1º By the collapse of oil prices.
- 2º Due to the fall in remittances that constituted the second item, after oil, in the Ecuadorian economy.
- 3º Due to the fall in exports of the main products exported by the country, because the crisis in developed countries directly affected the importers' pocket, which, in turn, affected Ecuadorian exports mainly of bananas, shrimp, flowers and cocoa
- 4º Due to the fall in foreign investments: Because there was less money to lend in the international market, the money for investments decreased.
The crisis of 2008 caused the economy of the country to be compromised, however, the historical crisis that Ecuador suffers over these years cannot be ignored, characterized by the concentration of resources in the hands of a few, by high levels of inequality in income, wealth, land and the means of production, imbalances that cause strong levels of poverty of a large part of the Ecuadorian population.
In conclusion , Ecuador requires an economic policy program that lays the foundation for the most equitable distribution of wealth.
One of the biggest problems is when the government system becomes corrupt, and instead of regularizing the large economic groups, they are beneficiaries of large agreements and lower controls on their operations, even reaching such dependence on these organizations that the same state must protect them to prevent a prospective crisis
ReplyDeleteClearly the financial system has had a development that the government has not been able to anticipate, in fact, international regulations were few and therefore the expansion of the effect of the crisis was a global scale.
Financial institutions, insurers, investors, and speculators played their cards in a deliberate manner, without considering that the collateral effects of their magical recipes for making quick money would leave thousands of families in poverty and stripped of their homes.
Although the crisis caused by the financial institutions was evident, few or none have been the regulatory statutes that have been applied recently, even the rescue of the institutions has been financed by taxpayers.
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ReplyDeleteGiven the deregulation generated in countries like the United States, a series of events arose from here, the initial one being the collapse of the real estate bubble in the United States, which caused the subprime mortgage crisis in 2007, since the banks granted many credits Mortgage without first analyzing the customer's ability to pay; Thus also the CDOs that were debt obligations appeared, which were given an AAA rating by the risk rating agencies, being these more risky. On the other hand, the bonds diminished their value which made investors demand the payment of their investments thus generating a liquidity crisis in the economy. Another important factor was speculation when buying swaps of noncompliance which made insurers bankrupt. This is how the financial sector was dominated by certain large companies including 5 investment banks, 3 insurance companies and 3 classification agencies, which caused a worldwide crisis.
ReplyDeleteBecause this crisis expanded worldwide, Ecuador was also one of the most affected mainly by its slow recovery.
This is how the lack of control to those who are taking advantage of to only increase their income causes great damage to those who have been affected by these events, as well as those who were unable to pay debts for their homes and lost them.
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ReplyDeleteThe entities Fannie Mae and Freddie Mac had a crucial role in the real estate financial crisis as they were the entities generating loans. In addition, mortgage-backed securities and other credit-backed securities became important elements in the investment portfolios and capital reserves of investors, companies, nonprofit organizations and governments around the world.
ReplyDeleteThe credit crisis has been much lighter in the banking sector than in the non-banking financial sector as commercial credit from all commercial banks went from $ 9.2 billion to $ 9.9 billion until 2008. Interest rates on AAA commercial bonds they remained in their historically low range of 5–6%. However, interest rates on BAA bonds increased by approximately 2% in the last months of 2008, from 6.5% to 8.4%, which suggests that credit risks are priced more strict.
The US government UU. After the crisis, respond with policies that are consistent with public choice predictions. On the other hand, the bureaucracy makes use of its bargaining power in order to ensure discretion over resources, although crisis management remains problematic as always, because decisions must be taken hastily in poorly informed circumstances.
The crisis of 2008 affected not only the United States, the whole problem was spread to many other countries, the way in which they manipulated the financial system was really incredible, both financial instruments and derivatives were manipulated as risk rating agencies, it was all part of a chain that was obviously going to end in a crisis. Giving mortgage loans to people without payment capacity caused housing prices to increase in price because everyone could access the loans and therefore the price of housing rises due to the increase in demand. The fact that the rating agencies gave high marks to companies that did not deserve it made many people invest their money in very risky operations.
ReplyDeletePersonally, I believe that many of the problems that led to such a crisis are due to mishandling by the state and also because of the shame on the part of business owners who only thought of their own interests. That is why the only way to avoid the crisis was to quickly detect and monitor the problems that were occurring at that time by the United States government.
The financial crisis of 2008 had a worldwide impact, the causes were based on the false financial regularization of indebtedness, that is, without the ability to pay at a low interest rate. In addition to the negotiation of a pyramidal nature in the sale of securitized mortgages to investment institutions. This release of the financial system caused financial innovation and non-risk aversion to increase credit, causing asset price increases, sales, massive insolvency and recession.
ReplyDeleteThis caused immediate effects such as the fall of the Wall Street stock exchange, which caused a domino effect internationally, in addition to quotes and provocations devaluations. As for Latin America, it caused credit restrictions for governments and companies, generating a decrease in public expenses, as well as macroeconomic destabilization and recessive pressures. They also suffered inequality between countries and companies. Also, it caused a contraction of the net capital flows and their increase due to the increase in interest rates.
Therefore, the financial norms must be oriented to the development of risk mechanisms and preventive intervention, to the control of capital and its liquidity and an impartial evaluation of the risks assumed by an entity, in addition to monitoring compliance with restrictions on qualified risk agencies.
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ReplyDeleteI agree with the arguments, which determined the triggering of the 2008 Crisis, but I would like to add that deregulation, corruption, the fact of being a judge and part in decisions about approving instruments, Gramm Law that involved the Central Bank of the United States or Reserve Federal; On the other hand, it should be borne in mind that this crisis was also promulgated through multiple events such as the September 11 attack and the internet bubble crises, which pushed the American population and the rest of the world in an ambush, creating a climate of instability, in this virtue people choose not to borrow and try to limit their expenses, to have liquidity in case of suffering an eventuality; Finally, a low-consumption model does not suit the financial system and the Federal Reserve has been promulgated since 2001 at low interest rates, who were used by thousands and miles of people to borrow from commercial banks who grant these loans with facilities and deregulations of access to credit that was premeditated by government regulations that urged banks to grant financing to sectors of the population that were supposedly excluded, thus increasing the risks. Thing that was used by investment banks and issued high-yield CDO securities, grouping in packages whether good or bad making them a lucrative and round instrument; taking it to seller on the stock market. who were used by milies and thousands of people to borrow from commercial banks who grant these credits with facilities and deregulations of access to credit that were premeditated by government governments that urged in banks and grant financing to sectors of the population supposedly excluded, thus increasing the risks. Thing that was used by investment banks and issued high-yield CDO securities, grouping in packages whether good or bad making them a lucrative and round instrument; taking it to seller on the stock market. who were used by milies and thousands of people to borrow from commercial banks who grant these credits with facilities and deregulations of access to credit that were premeditated by government governments that urged in banks and grant financing to sectors of the population supposedly excluded, thus increasing the risks. Thing that was used by investment banks and issued high-yield CDO titles, grouping in packages whether good or bad making them a lucrative and round instrument; taking it to seller on the stock market. grouping them in packages, whether good or bad, making them a lucrative and round instrument; taking it to seller on the stock market. grouping them in packages, whether good or bad, making them a lucrative and round instrument; taking it to seller on the stock market.
ReplyDeleteAlthough the crisis essentially erupted at the end of 2008, the first signs of the economic crisis occurred in 2007, when two hedge funds of the US bank Bear Stearns suspended their activities due to speculative investments in subprime mortgages.
ReplyDeleteHowever, in the United States, this was combined with weak banking systems with high leverage, in addition to informal operations and the expansion of assets with subprime mortgages that were weak to value and directly affected the financial institutions, that is, for example, there were difficulties on the part of the mortgage debtors to be able to face their obligations, in addition to the uncertainty on the value of the same assets which ended up affecting the solvency of the systems.
Therefore, it could be said that the banks, after the economic crisis, learned to strengthen their capital, in addition to a more secure supervision and regularization at the time of granting credits, since this set of rules was added by the Basilea Committee on Banking Supervision of the Bank for International Settlements as an agreement in Basilea III.
The real estate bubble unleashed in the US, also known as the 2008 crisis, is not a consequence of bad luck or chance. The causes were the financial deregulation, which start in 1980 and subsequently high-risk mortgage loans.
ReplyDeleteHowever, why did it become in crisis? Well, the participation of financial institutions without ethics as well as irresponsibility in the handling of financial instruments by investment banks, risk rating agencies and others. These entities promoted that people borrow with mortgages that were impossible to pay, harming and truncating dreams of many families, then with the debt instruments negotiate in the stock market until everything collapses.
The past events should not be repeated, because the ambition of a handful of people do not should harm the future and the lives of thousands. Finally, ethics, it must be a fundamental axis in the use of financial instruments and, above all, the participation of control agents and financial education as basic elements to avoid future tragedies.