Critically evaluate the reasons for the recent global financial crisis Essay

Critically evaluate the reasons for the recent global financial crisis - Essay ExampleThis view has late been confirmed by an IMF report (2011), that financial crises usually follow credit or asset harm breathes (IMF, p. 6). Moshirian (2010) has found that the inability of national regulatory bodies to respond adequately to a global commercialise that has suit increasingly interdependent has left these bodies unable to control regulatory arbitrage and the international movement of deadly assets (p. 504). In a way of confirming these last two perspectives Longstaff (2008) has found that lower movements in the ABX indicator of credit-default swaps did cause financial contagion in other financial grocery stores. This report will show how in the US, deregulation did serve to encourage market liquidity that could have advantaged banks and homeowners. The report will explain how the overlook of appropriate regulation in the financial markets led to both a real estate bubble and t he global financial crisis that reached the UK and world markets. ... gulation policy expressed through passage of US federal acts that eventually, though not intentionally, allowed banks to collateralize the assets and to use them, as investment banks, to participate directly in the secondary financial markets. Deregulation was originally intended to finance supply with more liquidity of resources in order to get a line an increasing demand in the real estate market. Eventually supply overtook demand while banks and financiers overtook market safeguards in favor of speculative profit. The US housing bubble that occurred in 1983 with the savings-and-loan debacle was amplified to multiple make in 2008, producing the financial crisis that counterpane to the UK and the world. The 2011 US Congressional Financial Crisis Inquiry Commission Report place widespread failures in financial regulation and supervision producing instability that undermined world markets (p. xviii). Deregulati on McClendon (2010) explains how in 1980 the bank sterilise Institutions Deregulation and Monetary Control act freed banks from usury ceilings held by US states, enabling them to charge formulaic high interest rates to appropriate populations for home mortgage loans. This act also raised the deposit insurance limits up to $100,000. The ceiling had previously been $40,000. The Alternative Mortgage Transaction Parity Act of 1982 presently followed and allowed banks to make adjustable rate and interest-only mortgages outside of state restrictions. Both of these measures were intended to help banks and savings and loans institutions spread more liquidity into appropriate markets. The US Garn-St. Germain Depository Institutions Act of 1982 enabled savings and loans banks to enter the lending market with low loan-to-value ratios (McClendon, 2010). The result was that the