Iceland Banking Crisis
The banking crisis that occurred in Iceland first emerged in 2008 and continued for a few years by most accounts. The small country had experienced a vast number of consolidations of banking and financial services over the years and there were only a few dominate players in this industry. Much of the industry had been opened up through liberalization in the industry's regulations that had allowed for a string of mergers and acquisitions to consolidate the industry. In the beginning there seemed to be a lot of advantages to this strategy. One of the benefits is that the industry was able to produce quantities of scale that allowed for expenses related to things like transaction costs to be reduced.
Another advantage to financial deregulation was that the larger firms that emerged had more bargaining power due to their pooled resources to be able to secure investments with…… [Read More]
In this regard, the author rightfully targets circumscription of the authority of the major agencies that are responsible for rating private credit which allowed banks to approve many mortgage situations with citizens that were tenuous, at best. The most efficacious way of doing so, particularly when one considers that most banks simply pay these agencies, which are primarily Fitch atings, Standards & Poor's, and Moody's Investor Services, oubini asserts is to issue a removal of the agencies' certification by the Securities and Exchange Commission as "nationally recognized statistical rating organizations." This publicly blessed oligopoly, intended to maintain high standards, has only inhibited competition that would bring down the price of security-rating services (Barrett, 2010).
The commission was widely vilified for not playing a more active role in limiting the unscrupulous behavior of banks that lured investors into poor mortgage situations (no author, 2012)
Ultimately, oudini proposes increasingly strident measures of…… [Read More]
The United States banking system has been around for quite a while. Indeed, the Bank of New York was founded in 1784, a scant eight years after the United States was created. The banking system has two major functions. First, they operate an overall payments system. Second, they facilitate and allow for financial intermediation. There was no formal financial system in the colonial states prior to the formation of the United States. The modern form of the banking system has only really been around since the early 1900's. The nascent form of the banks as they exist today was created by Alexander Hamilton. As of the inauguration of George Washington in 1789, only three banks existed in all of the colonies. Generally speaking, banks are typically financial institutions that are chartered and regulated mostly by the state in which the bank or banks operate. The banking system of…… [Read More]
These funds are now removed from the banking system. Keep in mind that banks use every dollar on deposit to create many more dollars worth of loans, the hit to the banking system and by extension, to the money supply is something approaching 25 to 30 billion dollars. This was a global phenomenon, as the crisis arises interest rates are slashed. So hence, by 2008-2009 the Federal Reserve, Bank of England to many others have pushed interest rates close to zero. He also explains how major players like Mr. Bernake and the Treasury Secretary Henry Paulson affected the crisis and how the steps and how they have left their mark on this financial crisis. He also contends that all crisis have an ebb and flow in their severity and rarely hit once and subside. He vilifies our toxic waste method of having recourse to non-recourse government loans and in the…… [Read More]
e. An amount that is about 1% of GDP) to ensure that the current PAYGO system is solvent for the next 75 years. Thus, 10 trillion dollars problem is not as large and scary if we start acting today to fix the current system).
It is totally manageable."
ut the official plan is somewhat different. ush's administration is trying to introduce private account systems where a fraction of payroll tax will be transferred to private accounts and managed by the future retirees themselves, thus, giving them chance to invest this money into stocks, which have proven to give on average higher rates of return than the Treasury ills which generate rather moderate income.
The opponents of this idea state that this is just a shell-game, where no capital is accumulated and investments are not increased. The overall national capital is not increased, but this plan will cause enormous transactions costs…… [Read More]
If asset bubbles can be leading indicators of recession, that begs the question what assets are the most important? Several studies have shown that housing prices are critical. They were important in Japan and in 2008 in the United States. Babecky (2012) showed that housing prices consistently predict asset bubbles, minus the occasional false positive. Intuitively this makes sense since any sort of bubble will result in more investment in real estate.
There is a further question that is raised in light of the contagion of the 2008-2009 crisis. Prior to that, as Evanoff (2013) notes, several asset bubbles were effectively contained by monetary policy and did little damage. Most bubbles that cause damage do so in the developing world -- Southeast Asia and Russia in the late 1990s for example -- but in the developed world the damage is usually contained. Frankel and Saravelos (2011) examined the indicators that…… [Read More]
There is no distinction between products that are exchanged to fill actual needs and those created to fulfill desires. This disregard for the true dynamic of capitalism creates the false perception that no crises can result. Marx however holds that the apologetics are vocal only in times of prosperity, while they are conspicuously silent during times when crises do ensue.
The most prominent related debate around globalization today revolves around the benefits (or lack thereof) of free market principles. Many hold that the free market system is beneficial for all participants, while others believe that the system perpetuates the poverty of third-world countries attempting to participate in the world market. At the same time, the richest countries become ever richer as a result.
The type of denial of the possibility of increasing poverty is reminiscent of the apologetic denial of crisis. Poverty is increased in poor countries by denying them…… [Read More]
Crisis at Footwear International
A multinational shoe manufacturing company has been accused of deliberately designing a shoe with an insole that is offensive to Muslims. Footwear International consists of a number of companies that are semi-autonomous with regard to operations, and are governed by boards of directors that include local business community members. The Footwear International company in Bangladesh experienced severe criticism from local activist student groups who interpreted the design of an insole to include the name of Allah. Further, the students charged the manufacturing company of being owned and financed by Jews, and somehow linked the entire episode to Salman ushdie. The designer of the shoe -- a devout Bengali Muslim who does not speak or read Arabic -- declared that the pattern integrated into the insole design was inspired by Chinese temple bells that she purchased. Further, the insole design had been considered and approved…… [Read More]
Subprime Mortgage Crisis -- 4 Questions
hat is "leverage"? How does leverage magnify a bank's profit and losses?
The term leverage refers to the use of someone else's money to create financial gain. In the mortgage industry, homeowners typically put down a small amount of money on a home, and borrow the rest in the form of a mortgage. This use of borrowed money for a large purchase is referred to as leverage. hile the homeowner has only put down a small amount of money and has borrowed a fixed amount from a bank, he may gain money in the form of home equity as a result of having used leverage to buy his home, because in the meantime, his home has gone up in value. hen a bank uses leverage, it can either gain money as its leveraged assets go up in value, or lose money as they go…… [Read More]
Marketing in the anking Industry
Prescott Valley, Arizona
Abridged Literature Review
While there are many industries in the world that are growing at a rapid pace, one of them is exceedingly doing well. This is because it relies upon the monies and funds of its customers and greatly influences the other industries as well. This is the banking industry. Although a common part of every consumer's life, the banking industry has been growing and developing globally. To understand such growth, the attention instantly goes to the strategic and marketing techniques that have been applied by the people of this industry. Therefore, to gain a thorough and concise outlook of the marketing wonders that have continue to enable the banking industry to succeed at all fronts, the research topic that has been proposed for this research paper is 'marketing in the banking industry'. This topic will not only…… [Read More]
Exchange Rate Crisis
Exchange rate crises are quite common phenomena in the economic world. From the 1994 Mexican crisis and the 1997 Asian crisis to the 1999 Argentine crisis, currency crises have occurred with a somewhat remarkable frequency. Also, known as currency crises or balance of payments (BOP) crisis, exchange rate crises occur when a country's monetary authority (central bank) has inadequate foreign exchange reserves to sustain its set exchange rates. This is usually caused by trade shocks, persistent budget deficits, foreign interest rate shocks, political uncertainty, banking system weaknesses, and moral hazard problems. An exchange rate crisis is often symbolised by factors such as hyper-inflation, banking crisis, devaluation, and economic recession, clearly indicating the dire consequences a currency crisis can have on the economy. More importantly, an exchange rate crisis can easily spread beyond the national boundary, underscoring the need for measures to prevent the crisis. This paper discusses…… [Read More]
Conclusions -- Was TAP Necessary -- A five member Congressional committee echoed a number of criticisms regarding TAP that many consumers, academics, and fiscal analysts were considering. What exactly was the Treasury's strategy with the $700 billion dollars for the supposed bail out? How can Treasury explain the significant gaps in their ability to find hundreds of billions of taxpayer money? In a nutshell, it appears that the departments that control the money given by the Congress (from the American people) have no ability to ensure that the bailed out banks will do what was needed and lend money; have no real standards of measuring success of failure of the program; and for ignoring pointed and specific questions from Congress about their performance (M. Crittenden).
The fact that many of the institutions bailed out with TAP funds, funds from the American taxpayer, did not distribute these funds back into the…… [Read More]
Many subprime mortgages were made with little documentation of income or ability to repay, or other elements that typically safeguard loans of all types and mortgages especially. There have even been cases of widespread fraud, where documents were falsified in order to approve loans. The reason many lenders were so eager to make these bad loans is that they weren't ultimately going to be responsible for them -- the loans were bundled into groups and sold as "mortgage backed securities," so instead of dealing with many individual loans worth an average of a few hundred thousand dollars, banks and other institutions were dealing with bundled groups of these bad loans worth millions of dollars apiece. Companies like AIG made money in the short-term by providing insurance policies for these mortgage backed securities, as well. Eventually, however, people with loans they couldn't really afford began to default, either because they simply…… [Read More]
They could not foresee the housing market falling as it did, and the number of foreclosures it would create, and so, they aggressively continued to pursue the market when they should have been cutting back. The top executives left the company, but they were not fired, in fact, Killinger retired, comfortably it would seem. The customers of the bank, especially those with mortgages, are the ones who really will suffer in the long-term. The bank will rebound, but those with foreclosed homes never got the chance for a bailout, and so, they lost everything, while the executives and leaders of the bank are not charged with any wrongdoing. Luckily, the American taxpayers did not suffer, either, because JP Morgan Chase financed the takeover and the continuing operations of the bank.
In conclusion, WaMu's failure came about due to a number of reasons. They invested far too heavily in the sub-prime…… [Read More]
Another significant factor that affected the financial crisis of 2008 was role that Wall Street played in worsening the impact of the financial disaster that was to come. Specifically, a number of prominent Wall Street companies effectively "bought in" to the housing shortage by investing in securities that are financially supported by loans of a dubious nature. A recent report compiled by the Financial Crisis Inquiry Commission alludes to the fact that such investors were well aware of the substantial risk that these investments represented, yet pursued them anyway due to avaricious tendencies (Chan, 2011).
The involvement of banks in the financial crisis goes well beyond issuing loans that were of a suspect nature to people who required subprime loans. To that extent, this degree of culpability on the part of banks can actually be traced to the Securities and Exchange Commission, another federal government entity, that was decidedly lax…… [Read More]
The U.S. is a property owning civilization and a number of the people wanted land and housing. Americans however scarcely ever create savings. "The country itself lives on other countries' savings by issuing bonds to finance its excessive consumption. The current crisis began with cheap housing loans offered by banks. Banks provided loans but instead of holding the loan in their books, they packaged them into collateralized debt obligations (CDOs) and sold them to other agencies. These agencies passed them on to others and spread them globally as assets" (the Current Economic Crisis, its causes, its impact and possible alternatives, 2009).
Interest rates were lowered and housing loans went up with construction activities leading to land prices increasing. The real estate was booming, generating employment and incomes. But as the rate of interest on housing loans came down, banks started to compete to get more business. Because of low interest…… [Read More]
shadow banking system, its role in the subprime mortgage crisis, and failures of regulation within the shadow banking system. The term "shadow banking system" was coined by PIMCO's Paul McCulley in 2007 (Spanos, 2012) and refers to a banking system that includes financial intermediaries that are involved in creating credit across the global financial system, whose functions are not subject to regulatory oversight (Investopedia, 2012). The question has been debated as to whether shadow banking meets the definition of true banking. Given that the two systems perform similar functions, including credit intermediation and maturity transformation, the two should be considered parallel systems (Noeth and Sengupta, 2011).
The term shadow banking is used to describe any provision of credit taking place outside of the traditional deposit-funded lending system. This definition includes institutions that range from pawnbrokers and consumer finance companies to securities dealers as well as firms that issue corporate bonds.…… [Read More]
Korean Financial Crisis in the Late 1990s: Lesson for Current Euro Area
The objective of this study is to examine what is unique or different about the Korean financial crisis as compared to other Asian financial crises and to determine the primary causes of the financial crisis in Korea. This work will further examine the government response to the crisis and what it is that can be learned from the Korean financial crisis and applied in Korea to the Euro Area.
The major components of the Korean financial system in the 1960s and 1970s are stated in reports to have been nationalized with "lending targeted toward favored sectors and firms including the exports and heavy industries. (Jeon and Miller, 2005) Regional banks came on in 1967 and could only operate in their own provinces, which provided encouragement for development that was regionally-based. In the early 1980s, plans were made for…… [Read More]
Diversification of anking Returns Through
Greater Share of Non-Interest
Income and Off-alance Sheet Activities
The banking system was considered to be stable before the great financial crisis of 2007. The banking system faced the worst turmoil during that period due to the evolution of the nature of banking activities. anks started to employ diversify their sources of income. efore 2007, the one and only function of banks was to take deposits and lend money. Diversification of banking returns included many off-balance sheet activities and non-interest incomes into the features of the banks. The extra features are collectively known as shadow banking because of the lack of transparency in it. These activities increased the borrowing and lending and eventually, everyone was in a financial turmoil.
"The advent of shadow banking has fundamentally altered the nature of banking. Where once banks weremainly in the traditional business of taking deposits and making loans,…… [Read More]
Global Credit Crisis on UK Northern ock Bank
The lingering effects of the Great ecession of 2008 still remain, but most authorities appear to agree that the corner has been turned and global economic recovery is well underway. The cause of the Great ecession of '08 was primarily the sub-prime mortgage meltdown that occurred in the United States, and its effects were already being experienced as early as September 2007, when the United Kingdom experienced a mass market run on Northern ock Bank, the first in the nation's history. The global credit crisis that resulted from these events has been felt in differing degrees by the nations of the world, but few countries in the increasingly globalized international community have been entirely immune from its effects. To gain new insights into this fiasco, this paper provides a corporate profile for Northern ock Bank, followed by a review of the relevant…… [Read More]
Economic Crisis Policies
US current economic crisis is considered to be started from real estate sector. The real sector started to decline in 2006 and it accelerated in 2007 and 2008. Housing prices have fallen from the peak from about 25% so far. The decline in prices left homeowners with no option and they were unable to refinance their mortgages and causes default of mortgages. This default of mortgages and loans swallowed the banks and financial markets such as falling of Lehman's brothers and other anks and blow to rest of economy happened as the whole economy was relying on banks and ultimately it slows down investment in the country and capital flows to other parts of the world like China and India. ank losses cause reduction of bank capital which in turn requires capital reduction thus saving bank from lending. It is estimated that every $100 loss and reduction…… [Read More]
financial crisis a "crisis of capitalism?
Compare and contrast the theories of Susan Strange, Karl Polanyi and Giovanni Arrighi. Explain how three of them accessed issues of Financial crisis and its relationship with capitalism
Starting from 2008 onwards, we are currently experiencing an unremitting state of economic recession. Each of the three theorists stated in this essay have different perspectives of whether or not the recession indicates crises of capitalism. Whilst Susan Strange and Karl Polanyi have a more optimist perspective on the subject and indicate that rather than crisis, the recession may, in effect, be, in the first case, a misplaced paradigm (or different, tortured perspective) and in the second case, only a slight wrench that necessitates government intervention for amending a temporary situation, Arrighiri sees the situation as indeed manifesting something that is intrinsically, irremediably, and inherently wrong in the structure of capitalism itself. Each of these views…… [Read More]
The revelation of the financial crisis that unfolded in United States in 2008 is considered to be the worst economic crisis since the Great Depression, 1929. The distinctive causative factors that have contributed to the U.S. economic crisis 2008- 2009 are differentiated by aggravated financial control, higher risks in capital investment, the housing bubble phenomena in relation to the brisk credit expansion. The aggregation of these factors in the U.S. economy directed the economy towards the de- leverage and credit crunches as the bubble burst. The following paper shall be discussing about the degree of correlation between the tax implications policies with respect to the financial crisis in U.S.. The precise review of strong linkages between the taxation and economic crises is the explicit explanation of the crisis that shook America. The paper also highlights the key factors that demonstrated their abilities and rescued U.S. In the economic…… [Read More]
Employee Relations Financial Crisis
Managing Employee Relations in the Event of a Financial Crisis
A Look into Management can Effectively Navigate through Adverse Conditions
Austerity Protests (Dowling, 2012)
Employee relations can often be a difficult aspect of maintaining the overall health of an organization. In general, employee relations often refer to the act of fostering productivity, motivation, and employee morale in an organizations human resources pool. However, there are some circumstances in which it is virtually impossible to maintain high levels of morale. One example of this is during a period of economic turmoil. During the global financial crisis of 2008, the world's economy took a sharp turn for the worse. This economic downturn had many implications for businesses and their employees. The level of unemployment rose quickly in many nations and pressure was also applied to lower employee wages.
In the event of such an economic downturn, it is…… [Read More]
The recession of 2008-2009 and the subsequent government responses provides a good test for economic theories. There are no controlled experiments in economics, so we can only work with case studies in order to understand how economies work. A good starting point is to consider the issue through multiple different lenses, so that we can understand how the crisis occurred and what prescriptions might be best suited for response either to address the root problems or to engage in prevention. This paper will consider the works of Marx, Schumpeter and Keynes in analyzing the financial crisis. All three of these men would have been able to understand its causes, but likely would have taken very different approaches to solving the problem.
The second issue at hand is the question of the future of capitalism. We have a pretty good sense at this point of what the response of…… [Read More]
economic crisis in Europe and the increasing costs for European countries to borrow money and bail out other Euro countries in financial distress. The EU nations that use the Euro have experienced a crisis among certain countries with high debt requiring bailouts for Greece and Ireland and the likelihood that Portugal and Spain may also need a bailout. Postponing the restructuring of high interest debts has led to further crisis rather than resolving any of the problems faced by insolvent countries. Huge transfer payments from the more powerful Euro countries, like Germany, to the failed economies of Greece and Ireland have made investors nervous and led to less investment at a crucial time. The author suggests that the debts of troubled countries need to be restructured now in order to create a sustainable payment to increase confidence and secure future payments.
Creditors will also have to shoulder some of the…… [Read More]
Credit isk Management
Banks are an important part of the economy of any nation. Traditionally, the banks operate as financial intermediaries serving to satisfy the demand of people in need of various forms of financing. Through this, banks enable people to purchase home and businesses to expand. These financial institutions therefore facilitate investment and spending that are responsible for fueling the growth of the economy. In spite of their vital role in the economy, they are nevertheless prone to failure and just like other types of businesses, they also go bankrupt. Unfortunately, the failure of banks can have many and significant implications than any other type of business. As witnessed during the great depression, and in recent times following the global economic crisis and recession, the stability or lack of it in the banking system could trigger economic epidemics that would impact millions of people. With respect to this, it…… [Read More]
The article that was written by Conley (2011) discusses the impact that collateralized debt obligations (CDO's) would have upon the subprime loans. These were created in 1987, by the Wall Street firm Drexel urnham. In this product, the investment bankers would take a number of different articles and combine them together as one investment. The various assets that were used included: junk bonds, mortgages and other high yielding investments from the debt. The idea with these different products is that the investment bank could offer customers a stated return on their investment. The way it worked is the brokerage firm would distribute each investor, the stated amount of returns that they would make off of the tranche (the CDO investment). This was derived using a complex mathematical formula that would divide the total amount of interest that was received, from the various high yielding products that were inside the CDO.…… [Read More]
Resulting from the devaluation of China's currency was an exacerbation of problems throughout Asia.
VII. 1995-96 -MINI-RECESSION, DET PROLEM, ACCUMULATION
In the summer of 1995, the reversal of the chronic weakness of the dollar resulted in the depreciation of the Japanese yen, which had been approaching an acute deflationary crisis with a steep fall in the stock market. (Makin, 2000; paraphrased)
VIII. 1996-97 - DET / FOREIGN EXCHANGE, RESERVE RATIONS DETERIORATE
The work of Williamson (1999) entitled: "Implications of the East Asian Crisis for Debt Management" relate that a countries debt can be viewed from four different external perspectives in terms of debt composition which include: (1) FDI; (2) Portfolio Equity; (3) Long-term loans; and (4) short-term loans. This is the ideal composition of a countries debts however the debt profile of countries in East Asia are known to profoundly differ from the foregoing profile in that they had too…… [Read More]
Ethics, Values, Social esponsibility
Bailout of Banking Industry in United States
Ethical Compliance by Banking Industry
It is quite common in American history that government comes for the rescue of companies and organization in the time of financial crisis. General motors' acquisition was one such example where saving GM meant saving the nation. When Government takes measure for the welfare of any segment of the economy, it then becomes responsibility of the organizations that they comply with social responsibility and ethical standards so that it should respond to its social character and use the benefits provided by the government in the honest fashion. The recent bailout of banking sector by U.S. government, and the misappropriation and misuse of these funds, have raised a big question mark on the compliance to ethical standards by the bank.
United States government has a long history of bailing out its financial institutions. Some of…… [Read More]
Asian Economic Crisis
In the summer of 1997, an economic and currency crisis rocked the Asian markets. One by one, southeast Asian countries such as Thailand, Indonesia, Korea and Japan saw their economies crash in the wake of heavy foreign investment. An economic boom had made the region an attractive investment opportunity for much of the 1990s. y 1997, however, domestic production and development had stalled, and foreign investors grew nervous. A divestment run on the Thai baht triggered the crash. Large corporations, extremely dependent upon the confidence of foreign investors failed to meet debt obligations and began to fail throughout southeast Asia. Currencies throughout the region faltered and nosedived from their mid-1990s positions of stability. The causes of the Asian economic crisis are varied. Lax oversight of corporations had ramifications in economic downturns that were not a concern in the mid-90s boom. Macroeconomic policies of the southeast Asian countries…… [Read More]
As banks faltered and default rates rose, rates of consumption and demand plummeted. Unemployment began to increase, and in a predictable Keynesian fashion, as individuals grew more insecure about their job prospects they began to spend less money. The United States has a particularly consumer-driven economy -- Americans are known for having historically low rates of savings and to engage in high rates of spending -- so this was particularly disruptive to the usual rhythms of the economy.
Young people graduating from college suffered some of the worst effects of the recession. "Unemployment rates for individuals younger than 25 are currently 21% in the euro area and 19% in the U.S." (Branchflower 2010). They were competing with older, more experienced workers who had recently lost their jobs. The fear is that today's low starting salaries create a class of permanently low-earning graduates, many of whom have high levels of college…… [Read More]
Using a timeline from the peak of new housing construction to the present day, the following occurred. GDP growth slowed, followed by a three-quarter recession and slow growth has resumed on the other side of that recession. The unemployment rate skyrocketed, more than doubling in a short period of time, and has lingered at high levels for over a year. The rate of inflation fell well below the Fed's target rate, this despite aggressive expansionary monetary policy. The federal government, whose budget had previously oscillated between monthly surpluses and deficits, has been in deficit every single month -- and deeper deficits than every before -- as it has taken several fiscal policy measures to contain the economic damage. This evidence makes the clear case that steps should be taken to avoid a repeat of this housing crisis in the future, since the economic impacts are uniformly negative and in many…… [Read More]
CS in Saudi Arabian Banking
Social esponsibility: Attitudes, Actualities, and Possible Areas of Advancement in Saudi Arabian Banking
The global financial system has become increasingly smaller and more complex, with individual countries and their financial and banking infrastructures more intertwined and mutually dependent on each other. Because of this, understanding the role that banking systems and entities play in the social and political spheres is essential for policy makers and for individuals working in the banking sector. Of special importance are the social responsibilities that are borne by banks and the banking industry, which can vary greatly from country to country, based on a multitude of factors. The research described and proposed herein will yield a greater understanding of how these responsibilities are viewed by bankers in Saudi Arabia.
Scholarship on Saudi Arabia's banking industry has focused almost entirely on the financial implications for the country and the globe of…… [Read More]
As Taibbi shows, it is not easy: "I'm going to say something radical about the Tea Partiers. They're not all crazy. They're not even always wrong. hat they are, and they don't realize it, is an anachronism. They're fighting a 1960s battle in a world run by twenty-first-century crooks" (Griftopia 16-17). Taibbi makes clear that the Tea Party is not even homogenous: it is made up of a broad spectrum of individuals (some of whom do not even want to be called Tea Partiers) who are angry and looking for someway to focus their anger.
In conclusion, recouping the losses is not an easy thing to do. hen a company like Lehman Brothers can be allowed to collapse while their competition (Goldman Sachs) can be bailed out by tax payer dollars, citizens are going to start wondering how their country got to such a point in the first place. Taibbi…… [Read More]
Another issue worth mentioning is that prior to the acquisition of 2007, the BB&T employees were already being offered training programs in convenience banking. The programs were basically revolving around the techniques which would be implemented by the organization. In this order of ideas, the most focus was placed on the De Le ue coin counting machine and the Datacard 150i instant issue debit card machine. Employees were taught how to operate, maintain, balance and audit the according operations. Emphasis was also placed on the elationship Bankers in reference to the new account bounding process including free gifts and the efer-a-Friend process. The improvement plan sees the continued training programs which teach staff members how to most efficiently operate the new systems and how to explain their benefits and functionality to the customers. Also, BB&T should remain channelled on the emergent changes affecting the market and the industry and should…… [Read More]
hy Did Mortgage Lenders Lend to Subprime Customers?
The growth of the subprime market owes itself to an influx of international and hedge fund investors who were increasingly separated from the final mortgagees. Banks and savings and loan institutions generally knew their borrowers, because they lived and worked in the same communities. hen banks and S&L's held the mortgages, they were making a bet on the creditworthiness of people they knew well. This started to break down in the late 1980's, when the federal government stepped in to the "S&L Crisis" and created the RFC -- Reconstruction Finance Corporation -- to buy assets and close down S&L's which had made imprudent loans.
Loan securitization was thus slowed down by the S&L crisis, but was built slowly over the 1990's as money center investment banks developed ways to evaluate and package the mortgages into understandable assets which could be judged as…… [Read More]
The Eurozone is currently facing a crisis on a number of fronts. The most pressing of these is Greece, which is heavily indebted to other Eurozone countries, creating a budget crisis in the country (Raman, 2011). As the risk of default on Greek sovereign debt increases, this puts downward pressure on the value of the euro. Other nations within the Eurozone are, in order to salvage the integrity of the currency, more or less obligated to back Greek debt. hile Greece is a significant problem for nations within the Eurozone, the currency would not be considered to be in a state of crisis if Greece was the only problem. The reality is that many peripheral Eurozone countries are in various states of financial disarray -- Spain, Italy, Portugal and Ireland all have problems (Ibid). Spain and Italy are in particular a problem, because they are too big to…… [Read More]
Causes of Financial Crisis
Ireland developed high growth rates based on rapid expansion of credit and a buildup of personal debt fueled by rising property prices (Ireland's economic crisis: how did it happen and what is being done about it?). This lead to risky bank lending practices. Banks also engaged in short-term borrowing from wholesale money markets causing increased risk appetite. Supervisors and regulators failed to identify and act on the emerging risks. Where construction was a large part of the employment and economy, it caused high unemployment rates and major bank losses in a bubble burst when household income could not afford to pay mortgage debt. Property value decreased making it harder to recover the mortgage value for banks. In turn, it created difficulty for the banks to pay back the short-term borrowing to the wholesale money markets. Where risks were not identified, no plans were put in place…… [Read More]
Economic Crisis 2008-2009
This report focuses on the events that took place in the Great crash of 2008-2009. It aims to highlight the events that took place and what the basic factors and events were that eventually led to the economy crashing. It is also a point of focus to determine what effects came about and how different parties were to be blamed for the deregulation that led to the catastrophic events of the crash. It is linked with the policies present at that time i.e. The Monetary Policies outlining the control of money supply and interest rates as well as the Fiscal Policy that focus on the government spending and taxation policies.
The financial crisis refers to a situation whereby there is a contraction of money supply and the amount of wealth in the economy. This is also known as a "credit crunch" whereby participants of the economy lose…… [Read More]
This program is focused onto the following directions:
Generating stability with exchange rates
ebuilding confidence in the monetary policy
Better managing and restricting public debt
eforming and restructuring the banking sector to insure more transparency and the implementation of internationally recognized policies (The Icelandic Government Information Center, 2008).
4. Short-term forecast for the economy
The 2008 has severely impacted the Icelandic economy. In light of the dramatic effects as well as the efforts put into the reconstruction and reconsolidation of the Islanding economy, major growths are not expected. In other words, it is generally assumed that the country will regain its stability through small and gradual victories, which will, for the time being, only manage to stabilize the economy. Growth rates are expected to remain low and for 2010 for instance, the growth rate of the gross domestic product is expected to be close to zero (Central Intelligence Agency, 2010).…… [Read More]
economic and financial crisis (2008-2009), the Federal Reserve took exceptional measures in order to combat the effects of the crisis on the American economy. These measures translated into an expansionary policy that included pumping money in the economy and purchasing assets that were in trouble. Through its expansionary work, the government was able to balance some of the effects of the crisis.
The question that seems to be on everybody's mind (and lips) today is where does it all end? One thing everyone can agree on is that this type of expansionary policy cannot last forever. The United States economy functions as a free market economy where the laws of supply and demand govern the realities of the market. A continuous and permanent intervention of the Federal Reserve is neither possible, nor healthy. What nobody can agree on, however, is when the expansionary approach should stop: now, in the near…… [Read More]
The asylum automatically granted under the Swiss constitution was denied for those seeking it for religious reasons. y 1942, only 9,150 foreign Jews were legally resident in Switzerland, an increase of just 980 since 1931. It was the Swiss government that requested the German government to help it identify Jews by stamping all Jewish passports with a prominent letter "J," following the Nuremberg acts in 1935. "y 1942, acting at the behest of Switzerland's establishment and the majority of its people, its authoritarian police apparatus was dedicated to keeping the country 'pure' and to saving it from being 'overrun with Jews'." Until 1942, the working Jewish community in Switzerland was forced by the government to support Jewish refugees.
The other side of the German interest in Switzerland's banks was related to the business of Germany and the looting of conquered countries. y 1941, Germany had exhausted all of its foreign…… [Read More]
Nevertheless, more crucial remained the truth that the dollar itself oscillated severely as against the yen that is another vital currency for carrying out business for the affected nations. The fading of the dollar within the decadal period from 1985 to 1995 made a huge boon in the trade surplus for the affected nations. Thereafter, the acute turnaround began in 1995 wiped their enormous edge in price and damaged their current account situation, which in its effect spoiled the trust in the market created an appropriate climate for the crisis. To put it differently, it was not the system of linking the dollar in its own which is responsible. The cause was the non-observance of the basic instability in the economies of the nations and the uncontrolled oscillation of the exchange rate of dollar-yen. The dilemma was the outcome of the huge quantity of unstable capital and the blind follower…… [Read More]
Thus if the taxation policy is shifted, it is possible to create a better situation. Taxes that are now current can be abolished if their contributions are minor. On the other hand taxes can be levied on things that are considered harmful like tobacco and drugs. This will be discussed when the remedies are sought to be established. (Edwards, 292)
"What should be done to resolve it most effectively?"
Tax cuts and abolishing some taxes can be effective with increased government spending. John Meynard Keynes advocated government spending as a method of getting over recession. Therefore a deep consideration of the federal government budget is in order. The budget uses the taxes, and spending by government to reach the desired equilibrium and thus the taxes, and spending are often beyond the general equilibrium and hence budgets are always unbalanced. To control inflation taxes are raised and spending reduced. Like wise…… [Read More]
Asian Financial Crisis. This offers everyone with specific insight about those factors leading up to these events and how they transformed the economy going forward. The combination of them helps to place what happened into perspective. (Das, 1999)
The economies of Asia became interconnected from increased amounts of globalization and more trade with developed nations (i.e. The United States, Europe, Canada and Australia). This resulted in these countries experiencing above average rates of economic growth. The problem was that many of the practices of various governments led to excessive amounts of speculation. At the same time, many emerging economies were growing at above average historical rates. This led to attitudes that the region will not experience slowdowns anytime soon. (Das, 1999)
In the summer of 1997, a chain of events occurred. That caused it to go from extreme boom and bust cycles. It started with the Thai baht going through…… [Read More]
New Jersey's Budget Crisis
Matt Bai and David Leonhardt agree that the rising cost of state government and the lack of fiscal restraint on the part of local and state government leaders has lead us to the budget crisis that many states are facing in these uncertain economic times. There are three lessons to be learned from these two articles; local and state governments need to become more efficient, contracts negotiated with public employee unions need to be reasonable, realistic, and affordable, and American's need to lower their expectations of what the government is able to do with the resources available.
Matt Bai gives three reasons for New Jersey's current financial woes, first the state sends 40% of its annual budget to municipalities and school districts in order to compensate for the shortfall in revenue from local property taxes. Second, the state doesn't have the recourses to cover its pension…… [Read More]
S. lawmakers have passed a $700 bailout bill to buy troubled assets from banks in hopes that they will start lending again. it's almost ironic that the government is encouraging more of the very same thing that caused the problem in the first place. It seems that the government will do anything it can to continue to fuel the consumption-based economy even though Americans are awash in debt. Further, there's no guarantee that banks will respond in the way lawmakers intend them to given that they will no doubt be held more accountable for their lending decisions and the precarious condition of the economy that makes lending more risky. For all these reasons, the bailout is a misguided policy effort that will not address the fundamental causes of our current economic downturn.
aker, D. (2008, February 14). Own to rent? Yes we can. Center for Economic and Policy Research.…… [Read More]
Contributions of Mohamed Talaat Pasha Harb to Egypt’s National Development and Banking System
Born on 25th November, 1867 in Cairo’s El- Gammalia, Mohamed Talaat Pasha Harb is considered one among the greatest personalities who contributed to Egypt’s overall national growth and development. He studied art, science, economics, literature, and French. After acquiring a law degree, he commenced his career in the role of translator in the Royal Circuits’ Lawsuits Section, responsible for state- owned farmland. Though favoring free enterprise, he was quick to climb the rungs of the career ladder, landing the position of lawsuits section manager (53-75)3.
His subsequent posts as manager were at various organizations including Kom Ombo Company (a firm that actively reclaimed and sold land) and the Egyptian Real- Estate Company (where he ensured citizens of Egypt held most of the shares). He penned numerous books, including “The Economic Remedy of Egypt and Creating the…… [Read More]
The second purpose of the $700 purchase of troubled assets is to create a market for the securitized versions of these assets. As a result of the crisis, the market for these assets became illiquid. The value of securitized debt obligations became near zero, which severely impacted the balance sheet of all banks that held these assets. By creating a secondary market for these products, the government hopes to increase their value. This will improve the balance sheets of the banks.
The second key clause in TARP is that banks selling troubled assets to the government are required to give the government warrants. This, in theory, protects the government from losses. The theory is that the banks will see an increase in value as a result of the government's efforts, allowing the government to profit from the warrants.
Ancillary to TARP was the FDIC's excusing of troubled assets in its…… [Read More]
Past financial crises provide us with a framework for understanding the best responses to future crises. There are three types of responses, and the best response will contain some form of all three. These are monetary policy, fiscal policy and regulatory policy. The latter is more a long-term response, essentially learning from the crisis and adjusting the legal/regulatory environment to reduce the odds of a similar future crisis emerging. More important from an economic point-of-view are the monetary and fiscal policy responses, and these will be the focus of this paper. In a forward-looking examination, it will be challenging to get much useful from 1907, because the environment then was different in every meaningful way from how it is today, but the responses can still provide some insight into financial crisis response. While all of the crises are different, they all have similar conditions -- there is panic…… [Read More]
Ergo, the role of the EU seems to be that of implementing protectionist policies. These would be developed onto three simultaneous directions.
A first set of policies would revolve around the creation of a new market architecture at the EU level. This would strengthen the EU's position in the face of future challenges by:
ensuring a sustained and strong support from central banks allowing banks to rapidly implement the rescue plans, and allowing the Union to rapidly implement decisive methods that would prevent the expansion of the crisis to other countries (Commission of the European Communities, 2008).
A second set of strategies revolves around the necessity to really analyze the impacts the crisis has had upon the real economy and find ways in which to improve the real economy. These policies would combine short-term solutions to issues in need of rapid response as well as long-term projects. The short-term solutions…… [Read More]
Asian Financial Crisis of 1997
The economies of the so-called "Asian Tigers" were looked at with envy by the rest of the world in the early 1990s. These Southeast Asian countries -- South Korea, Taiwan, Singapore, Hong Kong, Malaysia, and Thailand had shown impressive (in most cases double-digit) growth rates for the preceding decade and more; thus becoming "darlings" of liberal capitalism and globalization in the post-cold war era. Other developing countries were looking to follow their example, and indeed Indonesia and Philippines were straining at the leash to join the "tiger" club. Investors, bankers, and fund managers from all over the world were queuing up to be part of the Asian "economic miracle" -- and perhaps make a quick buck or two in the process. What's more -- the "trickle down effect" was actually pulling the poverty line in the region steadily downwards giving rise to a growing and…… [Read More]
But amid the celebration, crucial opportunities have been lost: In September 2009, the "inspector general for the Troubled Asset Relief Program, a k a, the bank bailout fund, released his report on the 2008 rescue of the American International Group, the insurer. The gist of the report is that government officials made no serious attempt to extract concessions from bankers, even though these bankers received huge benefits from the rescue. And more than money was lost. By making what was in effect a multibillion-dollar gift to all Street, policy makers undermined their own credibility -- and put the broader economy at risk" (Krugman 2009). Many banks have given back their TARP funds, in exchange for the ability to once again engage in risky activities, to pay traders the bonuses they desire, and to pay executives what seems to be overinflated compensation. In June ten of the largest recipients of aid,…… [Read More]
International Lending and Financial Crisis
One of the major global financial crises is the financial crisis of 2007-2009. The financial recession that occurred between 2007 and 2009, encompasses the housing bubble that instigated the financial crisis, federal expenditure, and foreign exchange rates. Also, referred to as the 'Great recession', this global financial crisis had adverse impacts not only on the financial markets but also on the economies of nations across the globe, being the worst financial crisis in history. The financial crisis emanating from the U.S. affected other nations owing to financial globalization and led to discussions regarding restructuring of the international financial system (Ozkan, 2012). In particular, the global financial crisis originally started in and adversely impacted the financial sector of developed nations, especially in the United States, and subsequently had a detrimental impact of the real sector of affected nations as the financial institutions in the United States…… [Read More]
English Right of Set-Off and Combination in the Circumstance of Insolvency
The right of combination and set-off, as developed under English law offer a number of safeguards to banks and creditors in general. These rights were expanded under the principles that they were necessary to effect substantial justice and that they would stimulate economic growth and trade. In the following paper, I suggest that the judicial application of these rights has tended to unfairly favor banks at the expense of the individual customer, which may initially stimulate growth by encouraging banks to provide loans, but in the long-term may serve to deteriorate trade, particularly at the international level. Customers in other countries, particularly civil law countries, experience much more risk when they do business with an English bank, and hence may be better off refraining from bringing their enterprises there, or at any rate must be extremely careful in drawing…… [Read More]
Canada: Comparative Politics
Canada, like any other nation suffered terribly from the effects of the global financial crisis. The economic impacts from Global Financial Crisis were resolved through Canada's political and provincial administration structures. The Great ecession further intensified such trends towards elements of the precarious unemployment across Canadian provinces such as British Columbia mostly with certain population groups. This paper intends to illustrate how the global fiscal crisis has affected provincial economies in Canada.
Global Financial Crisis Impact on Provincial economies
The goal was to establish suitable forms of welfare states that mediated on the effects of forces of the global market forces through the determination of levels of state intervention within the provincial economic marketplaces. The liberal welfare regime in Canada as compared to the conservative one in Germany and social democratic from Scandinavian countries focused less on welfare provision and citizen security. This translated into…… [Read More]
International Crisis on Businesses.
In this paper, I will assume the task of a consultant at McKinsey and Co. It is my duty to analyze the effects on international and local businesses of the problems which are erupted in Middle Eastern/Northern African countries particularly Egypt, Tunisia and others. This paper will be produced for the clients of McKinsey and Co in order to assist them in their respective strategies for the region. The main four topics which would be addressed in this paper are as follows, the local impact on business, the global impact on businesses and industries, the impact on shareholder value and wealth of the most affected companies and finally the short, medium and long-term political influences which might affect businesses.
Local Impact on Businesses
During the times of severe political or social unrest which is now seen in countries like Egypt, Tunisia, Syria and others, the overall…… [Read More]
All these were achieved with immense marketing budgets.
In the current situation when the United States and the world are threatened by an economic crisis, the giant shoemaker continues to sustain an increased marketing budget. A specification that must be made however is that changes in the structure of the budget have occurred. In this order of ideas, the marketing specialists at Nike are more centred on interactive and innovative marketing, rather than traditional marketing operations. In a time of financial difficulties then, the number one shoemaker of the globe is trying to approach the audience using less conventional means. Nike officials argued that they were not in the business of keeping the media companies alive, but that their primary interest was that of best communicating with the audience. In this order of ideas then, the multinational organization drastically reduced marketing budgets for television advertisements and other traditional means and…… [Read More]
Effect of the recession on upon financial market, the real economy and over everyday lives
ecession is defined as the economic slowdown or decline characterized by slowing down of trade, a magnitude decline in the GDP, and a decrease in employment usually lasting between 6 months to a year. This was the situation in the U.S.A. The hardest times being from 2008 through 2009 and the early months of 2010. America is still recovering from the effects of the recession that the country experienced from 2007 to 2009.
The slow down in economy triggered a massive job loss and unemployment rates that shot through the roof, the prices went up and a great deal of uncertainty rippled through the country. This situation has now seen a reverse trend albeit at a slower rate than was expected by many. The unemployment rate in November 2011 fell by 0.4% to 8.6%…… [Read More]