The Global Financial Crisis - 1580 Words

In the following essay, I will briefly summarize some of the main events leading up to the global financial crisis. Following this, I will discuss the effect this had on the banks and ergo the credit supply, then examine how this contributed to the corporate failure. I will also pay some attention to how the market imperfection can affect firms real decisions. Finally, I will sum up the main points of the essay. The banking panic of the fall of 2008 set economies around the world into a severe recession. The spark of the panic was seen in mid-2007 the credit boom, followed by the demise of subprime mortgages and securitized products. This, in turn, raises worries about the solvency and liquidity of financial institutions, evolving into a full-blown banking panic. Resulting in the failure of the Lehman Brothers and Washington Mutual, and multiple governments run financial institutions. (Ivashina Scharfstein, 2009). As a result during 2008 the prices of most asset classes and commodi ties declined, although the cost of corporate and bank borrowing rose significantly. In both the USA and the UK interest rates peaked at over 5% (See Appendix A). Consequently, Syndicated lending started to fall mid-2007, then accelerated during the banking panic September 2008. The lending in the fourth quarter of 2008 2008: Q4 was 47% lower than the previous and 79% lower than in 2007: Q2 (ibib). A decline in the demand could explain the overall drop in lending, it might also explainShow MoreRelatedThe Global Financial Crisis And The Crisis Essay1244 Words   |  5 PagesIntroduction The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. 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