Global Financial Crisis: Causes and Responses
DOI:
https://doi.org/10.54691/bcpbm.v44i.4917Keywords:
Subprime mortgage; credit default swaps; regulatory responses.Abstract
This paper analyses the reasons behind the 2008 financial crisis, its effects, and the solutions proposed. based on the US's early adoption of low exchange rates and lax financing requirements, which proved popular for homes and raised home prices. Banks made the decision to use sub-prime loans and credit default swaps as a result. Both policies, however, had significant flaws. In other words, the financial crisis caused the Lehman Brothers bank to fail, a spike in global unemployment, a rise in mental health problem-related suicides, etc. To deal with the consequences of this, the country came up with two more policies: the Dodd-Frank Act and the Basel III policy, to deal with the financial crisis. Both policies have been effective in undoing some of the effects of the financial crisis. It is concluded that understanding this typical financial crisis is effective to prevent future banking crises and to address the economic problems.
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