Collapse of Economic Systems e.g. banks?

Question by dont worry bout it: Collapse of Financial Systems e.g. banks?
Somebody inform me result in I truly got to know. I saw an article about Bank of America getting a two.two Billion dollar loss. I dont care who you are or which organization you belong to, you happen to be gonna feel a 2.2 Billion dollar loss.

A lot of items have been mentioned via out the ages, from Nostradamus, to ancient civilizations..They say the truth will drive you crazy, it would quit our way of life so THEY maintain it away from ‘commoners’.

Is this and the turmoil in the Middle East, Iran’s quest for superpower most recently the beginning of a new order, in which systems and societies will be forced to adjust?

Do you feel there is any truth in this?

Best answer:

Answer by Stella
The current financial crisis was precipitated by a bubble in home rates and its subsequent burst, which led to a wave of foreclosures, the seizure by the Federal government of the principal automobile for securitization (the Government Sponsored Enterprises [GSEs] Fannie Mae and Freddie Mac), the obliteration of the “private label” securitization industry, the failure of 92 banks so far this year, and bailout costs for the remainder of the banking program. No 1 has come out smelling like a rose. The question we address is what should happen to the historically most essential players in the mortgage market place: Fannie Mae, Freddie Mac, and the banks.

Broadly speaking there are two models for funding mortgages (and other loans): the portfolio lender model, which entails economic institutions (e.g., banks) originating and holding loans in their portfolio and funding them with debt (e.g., deposits), and thesecuritization model, which entails getting loans and placing them into pools and selling (perhaps structured [1]) shares in the pools to capital marketplace investors. Numerous of the present monetary arrangements are combinations of the two. The easiest way of hunting at the two models is to believe of them as applying to institutions called “banks” and “securitizers” and to view the rules and positive aspects that apply to them as their “charters.”

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Economic Question commercial banks?

Question by steve: Financial Query industrial banks?
When industrial banks have excess reserves, they can generate funds and increse the Nation’s funds supply. List two transaction carried out by commercial banks, when they create money, (i.e. list two items they do with the cash they produce).
a. Commercial Banks will
b. Industrial Banks will

Ideal answer:

Answer by simplicitus

In reality, banks never start off with the reserves they make the loans and then cover the reserve requirement

And most loans that produce money are not made by banks with reserve requirements at all but by the shadow banking method, which isn’t regulated by the Fed

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Q&A: International economic crisis?

Query by Boots B: Worldwide financial crisis?
I have a reseach about the causes of the global financial crisis so i want assist locating trustworthy websites that can give me the info? Can any1 assist offer some hyperlinks?
Thank u!!
BTW im in 10th grade!!

Ideal answer:

Answer by Randolf
youtube! study the comments there.. There’s a lot acting so known as genius there.

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best concepts for economic reform right here very best answerers club?

Query by Luke A.: best suggestions for economic reform right here ideal answerers club?

Greatest answer:

Answer by vvswarup
– First of all, investment banks and commercial banks need to be split once more. A lot of what we saw before this crisis unfolded is related to what was going on in the years leading up to the Fantastic Depression. One of these items was that investment banks and industrial banks have been in bed with every other when they shouldn’t have been. Investment banks do investment-associated activities such as underwriting securities. They deal mainly with institutional consumers such as organizations. Commercial banks do issues such as giving out loans. Nevertheless, prior to the Excellent Depression hit, commercial banks and investment banks were dabbling in each and every other’s activities. Prior to this monetary crisis unfolded, the very same point occurred. Selling mortgage-backed securities on the open market was once the exclusive purview of Fannie Mae and Freddie Mac. Nonetheless, banks wanted in on the action. In response the Excellent Depression, the Glass-Steagall Act created a wall of separation among investment banks and commercial banks. In 1999, this Act was repealed so banks could get in on securitization.

– Next, Repo 105 need to be abolished. Repo 105 is an obscure accounting rule that allows businesses to hide leverage (debt) from their balance sheet by passing it over to a shadow firm. Lehman Brothers had enormous amounts of leverage but dressed up their balance sheet by using Repo 105 to hide it. This balance sheet was utilised to entice shareholders. Firms need to not be able to do this.

– The government bailed out certain monetary institutions due to the fact they have been “also massive to fail.” The government should have a way of preventing economic institutions from acquiring “too big” in the 1st place.

Finally, as significantly as government reform is required, a cultural reform is required also. In the years top up to the financial crisis, huge-name financial institutions like Goldman Sachs became nicely-identified for gargantuan bonuses. If an employee could do something to make brief-term income skyrocket, they got a massive bonus. At times, this was completed without having thinking about the extended-term impact. Economic institutions require to cease encouraging this behavior. Not each and every good company selection will outcome in huge short-term profits. Often, the worth of a selection will be realized later on. Economic institutions ought to understand this reality and encourage this or else they will be rewarding employees who put the firm in jeopardy all since of chasing right after a big quick-term profit.

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what are the causes of the international economic crisis in 2009?

Query by Stardust Ash: what are the causes of the international financial crisis in 2009?
elements that led to the 2009 international economic crisis.


Best answer:

Answer by Simone
The list of causes of the crisis is fairly lengthy because there have been systemic failures and contributing aspects but the primary causes could be summarized with:

*A housing bubble – that eventually burst
*Poor underwriting/sub-prime lending at financial institutions
*Securitization of mortgages/creation of atypical investment autos
*Aggressive threat management
*Poor contingency arranging

I think what produced the crisis shift from the US to the rest of the globe is that truth that we reside in a very connected, international economy. So, a crisis that originates in one nation has the possible to debilitate another – producing a ripple effect.

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Economic Questions please help me?

Question by Help: Economic Questions please help me?
1) All other things being equal among the banks below, which bank is the least likely to become insolvent?

a) Bank D with assets of $ 400 million and liabilities of $ 310 million
b) Bank C with assets of $ 200 million and liabilities of $ 120 million
c) Bank A with assets of $ 100 million and liabilities of $ 80 million
d) Bank E with assets of $ 100 million and liabilities of $ 60 million
e) Bank B with assets of $ 100 million and liabilities of $ 70 million

2) _______ capital specifies the amount of capital financial institutions should hold based on the riskiness of their assets.

a) Securitization-based
b) Risk- based
c) Leverage-based
d) Regulatory

3) Rising savings rates in emerging countries in the period 2000-2008 are associated with both falling and rising mortgage interest rates in the United States.

a) True
b) False

Best answer:

Answer by Aleconomixt
a) Bank D with assets of $ 400 million and liabilities of $ 310 million

b) Risk- based

a) True

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Can our economic trouble we are facing today be traced back to ?

Question by TicToc….: Can our economic trouble we are facing today be traced back to ?
the Carter days when he and the democrats passed the Community Reinvestment Act back in 1977 ?

It has a chain of events that point to former democrat presidents as well. Clinton in 1995 strengthen the bill by introducing subprime authorization. Future revisions allowed the securitization of the CRA loans containing mortgages forced banks to issue 1 Trillion Dollars in Subprime Loans.

1992 : Required Fanny Mae and Freddie mac to purchase and securitize mortgages. Which lead to lending support for affordable housing.

It only get worse from this point on!

My point is that this problem is caused by the government legislation, and shell companies that lend bad credit to unqualified borrowers, who don’t have the means to pay it back. They did everything in their power to cause this. Call it an ace in the hole or up your sleeve if you will. This came up in October before an election, which I think was purposefully intended by the democrats as an insurance policy to get Obama elected.

Best answer:

Answer by curious21
True but not accurate enough; rather than 1977, it can be traced back to the implementation of a privatized banking system that is under no regulations but what it sets; Woodrow Wilson, 1913. Worst president ever, yea even more than Bush

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Q&A: Do you agree this is what caused the economic crisis?

Question by what?: Do you agree this is what caused the economic crisis?
I found this on fact check

The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.

Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.

Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.

Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.

The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.

Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.

Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.

Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.

The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.

An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.

Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

Best answer:

Answer by new mom
uh, yep that about sums it up

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My question is in two parts. What are Hedge funds and how did they contribute to the currect economic down tur?

Question by : My question is in two parts. What are Hedge funds and how did they contribute to the currect economic down tur?
The second question is how do subsdies from developed countries under cut developing countries,ie,Europe and Africa.

I am a lay man so please go easy on me a simple answers will do.I am not interested in Politicsssssssssssssssssss

Best answer:

Answer by financegal27
Ok I’ll try my best to answer these questions:
1. What is a hedge fund?
Hedge funds like mutual funds for high net worth and institutional investors. Hedge funds are Regulation D offerings under the SEC code, and as part of the Regulation D requirement they are not an investment that can be offered to all investors, cannot be marketed directly to the public, and to meet the SEC guidelines they can only be offered to accredited investors or qualified purchaser depending on if they are considered 3c-1 or 3c-7 funds. They are not subjected to the restrictions of the 40 Act.

An accredited investor is defined as:

1. a bank, insurance company, registered investment company, business development company, or small business investment company;
2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $ 5 million;
3. a charitable organization, corporation, or partnership with assets exceeding $ 5 million;
4. a director, executive officer, or general partner of the company selling the securities;
5. a business in which all the equity owners are accredited investors;
6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $ 1 million at the time of the purchase;
7. a natural person with income exceeding $ 200,000 in each of the two most recent years or joint income with a spouse exceeding $ 300,000 for those years and a reasonable expectation of the same income level in the current year; or
8. a trust with assets in excess of $ 5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

A hedge fund can use a variety of investment techniques that mutual funds cannot, they can hedge positions by shorting stocks, purchasing derivatives, swaps, leverage arbitrage, etc.. They are a complicated investment, that can be very risky and require sophisticated investment knowledge to make an educated decision as to what to invest in. Though, contrary to popular belief the majority of hedge funds are often less risky an investment than most mutual funds, the reason people have concerns with them is actually due to the operational differences and smaller nature of the firms that run them. The strategies can be complicated though and while the goal is to reduce risk understanding the strategies is really important because some strategies actually are quite flawed and/or expose you to risks that are different than traditional market risk which can result in significant losses.

2. How did hedge funds contribute to the current economic downturn?
They really didn’t, I’m not sure why they continued to get blamed for it. The current economic down turn was caused by a number of things, but mostly it was due to easy credit, the excessive use of leverage by investment banks, flaws in the securitization of mortgage securities, failure of the SEC and other regulatory authorities in the oversight of these organizations, failure of the rating agencies to properly evaluate the risks of securitized fixed income products. The hedge funds had nothing to do with it. They are investors who lost money as a result of this as well.

3. How do subsidies from developed countries under cut developing countries. Well this is really best addressed by simple economics, subsidies are a type of financial assistance provided by the government to help benefit a specific industry. The problem is it artificially warps the normal laws of supply and demand. In general its the subsidies that the emerging economies themselves provide that cause problems. For example, China has historically subsidized oil prices, meaning they set the price of oil at a rate to help facilitate the demand, using the government’s surplus to cover the difference. So let’s say China wants the price of oil to be $ 20 to make it affordable for the people, but oil costs $ 50, the government subsidizes the difference and the people’s demand reflects the $ 20 price, this means that demand would be much greater than price and supply warrants, pushing up the price of oil for everyone else, so everyone else suffers. Eventually so does the government providing the subsidy because their costs skyrocket and this leads to a major downturn in oil prices as the government adjusts or removes the subsidy, demand falls very suddenly and prices crash. In the mid 1900s the U.S. government subsidized the farmers in this country to ensure that they would be able to make an attractive profit and encourage them to keep harvesting as the cost of production was rising. However the subsidy artifically solved the problem, farmers ended up producing more than was demanded, prices fell and the subsidy no longer covered the short fall so many farms went out of business. This links below also covers this issue in depth:

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Q&A: Why is Obama blaming Wall Street executives for the economic crisis ?

Question by Jim R: Why is Obama blaming Wall Street executives for the economic crisis ?
For the most part, Wall Street was playing by the rules which were set and/or mandated by Congress. Why are Barney Frank, Chris Dodd, the Carter/Clinton Community Reinvestment Act, etc held blameless by this President-Elect? Moreover, why should we trust/allow these same politicians who helped to create the crisis to be tasked with solving the issue?

Best answer:

Answer by The Breeze
uh, maybe because they caused it and now they are flying to Washington DC on their private Lear jets, begging for handouts? Duh…

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What were/was/are/is the main causes of the economic situations?

Question by Jimmy H: What were/was/are/is the main causes of the economic situations?
I use those 4 terms because are the problems current day? Are they singular? There is the whole idea that if you get to the root of a problem, you can fix it. Is that applicable in this situation?
Also, does the stock market play any role?
While I’m here. Many people say “invest in gold/ silver.” Does that translate to just buy it, or how else do you invest in it?

Best answer:

Answer by Hereese
over speculation
sub prime loans
housing market, which is connected to sub prime loans

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Can someone explain Securitizations and CDOs and how they contributed to the economic collapse?

Question by Charlie: Can someone explain Securitizations and CDOs and how they contributed to the economic collapse?
I’m writing a research paper and I can’t get a grasp of HOW these aided in the collapse of companies.

Best answer:

Answer by LouBee
It made it easy to unload toxic loans on unknowing investors.

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Why do people still think the economic meltdown was caused by Jimmy Carter’s Community Reinvestment Act?

Question by Change Now: Why do people still think the economic meltdown was caused by Jimmy Carter’s Community Reinvestment Act?
This is the most ignorant thing I have heard so far from this economic meltdown.

Don’t people know that securitization of residential and commercial mortgage and the out of control derivatives is what caused this mess.

The CRA contributed, but an extremely minor role. I heard that as little as 1 out of 20 bad mortgages were attributable to the these type of subprimes.

If someone can provide evidence to the contrary, I would be grateful.

Best answer:

Answer by Proud Texan
Fox fictional News and Rush Limbaugh told them to believe it without question.

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