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Financial Institution and Marketing (Essay Sample)

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The assignment is about two consequences of the Global Financial Crisis. Furthermore, it revolves about how Global Financial Crisis has affected the banking sector in the US and Australia.

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Financial Institution and Marketing
Question I
The Global Financial Crisis is an ongoing issue in the present day. In fact, this crisis led to a myriad of consequences in the year 2007 and year 2008 (Alessandri & Andrew, 2009, p. 46). It is lining to the stock markets of the entire world that continues to diminish. In addition to this, there are huge economic firms that collapsed and other companies put on receivership in consequence of this problem. Many governments, in the rich countries, ended up securing their economic structure on account of this international problem (Bhattacharya, 1982, p. 373). According to Leonardo (2009) in BIS Quarterly Review, a large number of individuals believe that the parties accountable for this economic problem are living freely p. 43. This is despite the fact that, an international economic crisis will impact the lifestyle of approximately everybody in a developing networked globe. On the contrary, economic experts and scholars believe that there was a way to evade this economic issue.
Causes of Global Economic Crisis
* Credit bubble – In the year 1990, China amid other huge growing nations, as well as the leading oil generating countries, created big capital oversupply. The spread of credit lessened, which implies that the expense of having a loan for investing in unsafe investments is low. Owing to this fact, a credit bubble in America and other European nations developed. This was a significant sign of doubled investments in highly risky mortgages. On the contrary, the American financial policies could have played a role in the credit bubble except causing it.
* Housing bubble – In the early 1990s all the way to the year 2000, it was evident that America was experiencing a huge housing problem. This housing problem associates with a significant increase in housing prices (Aizenman, & Yothin, 2009, p 76). In fact, most houses are beyond the normal house pricing pattern. Many home owners and business investors lost a lot of money from consequences arising from the housing problem.
* Non-conventional Mortgages – According to Barth, Gerald Caprio Jr., & Ross (2004), a decrease in the credit spread, excessive positive trust in the American housing prices, and huge mistakes in initial and the resultant mortgage market, set in motion unfortunate actions, p, 206. This includes fusing to develop the stream of credit to American housing finance. Many companies ended up with highly risky mortgages that, in a number of occasions, were deceiving and further puzzling. This is as a result of the low-priced credits from companies like Washington Mutual and Countrywide which could not finance their loans. Owing to this fact, a huge number of home buyers and home owners could not comprehend the conditions of their mortgages. Ultimately, these causes led to the housing bubble.
Question II
Bank Failures in Europe
This economic problem led to the creation of international financial shocks. In addition to this, there was a recorded decline in stock index and huge decrease in market values of equity and products (Ahrend, Rudiger, Boris, Cournede, & Robert, 2008, p. 78). Issues like failure to forfeit credit as well advanced the connection flanked by huge economic firms. In addition to this, the re-management of financial companies, as assets are up for sale to reimburse requirements that may perhaps not be refinanced in petrified credit markets. International politicians, global financial cabinet secretaries and central bank executives harmonized their attempts to decrease risks. Despite this, crisis still continues. In the year 2008, a financial crisis advanced, with business executives changing large capital goods into powerful currency types like the Yen, Dollar and the Swiss Franc (Aizenman, et al., 2009, p 77). This led to a large number of developing nations to look for help from the IMF.
Collapse of Financial Institutions
The primary occasion that indicates a prospective consequence of the financial crisis took place in Britain in the year 2007. This is when BNP Paribus, indicating an entire vanishing of liquidity, barred the withdrawal in 3 hedge funds. The value of this occasion could not be identified fast, however, in a short while, it fostered panicking as a business executive tried to pay for the assets put in extensively managed economic firms (Barrel, Davis, Karim, & Liadze, 2010, p. 363). According to Ahrend, et al., (2008), America and other countries in Europe lost approximately $ 1 trillion on arising from noxious assets and bad loans in the year 2007 and 2009, p 597. On the other hand, these losses ma anticipated toy increase up to approximately $ 3 Trillion as years go by, Barrel, et al., (2010), estimates that the American bank losses will reach $ 1Trillion and European bank losses will get to $ 1.5 Trillion. IMF projects that American banks are approximately 61% down their crisis. On the other hand, Britain and European banks are at 41%.
On of the primary firms to face this challenge was Northern Rock, a middle size bank in Britain. Owing to its elevated business management structure, it asked for collateral from The Bank of England. Owing to this fact, there was an investor panic and a bank run in September 2007. According to, Barth, et al., (2004) futile efforts from the Revolutionary Democrat Financial spokesperson Vince Cable to make public the firm was not fruitful, p. 207. On the other hand, the British government, after failing to obtain a private investor, made the firm public. Northern Rocks issue turned out to be a primary sign of problems that could in future come to pass on other banks and financial organisations.
In fact, impacted firms in the housing construction and mortgage lending business include, Northern Rock and Countrywide Financial. These firms had no chance of obtaining loans via the credit markets. Approximately 110 mortgage lenders turned out to be bankrupt in the duration of the year 2007 and 2008 (Alessandri, et al., 2009, p. 47). Worries that investing bank Bear Stearns will fall in March 2008 led to its sale to JP Morgan Chase. The Financial Institution problem reached its greatest height in September and October 2008 (Barrel, et al., 2010, p. 209). A number of institutions collapsed, whereas others worked under great constraints, or under the government.
Question III
The American Scene
It is evident that when risks are present, then the macroeconomic results can turn out acute. From the time of Keynes’, it is clear that the economy works largely on self-assurance. In case companies and its customers do not have enough confidence, they will stop investing their money in American banks (Aizenman, et al., 2009, p 78). In the long run, programs that in the past were money-making later on become risky and not striking anymore. The control of banks and their actions can illustrate how American mortgage problem came to be in the North Atlantic banks. On the other hand, business and self-assurance illustrates the reason why the North Atlantic bank problem turned out to be an international problem. The escalation of the present day problem in consequence of the Lehman collapse in September led to the fall of a large number of macro-financial structures (Bhattacharya, 1982, p. 79). Business productivity reduced greatly in major countries. On the other hand, the price of products, which were earlier on rising, deteriorated greatly by the end of the year. This led to an abrupt reduction in the size of international business. In this business industry, projectors had to reduce their projections for productivity development constantly. The ineffectual international macro-finance position indicates that borrowers have turned out to be risky. A large number of borrowers are possibly going to find it hard to pay for their amount outstanding. In addition to this, b...
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