Name: Nooran Amir

ID :BBA201081
FIM Assignment no 1 (BBA VII)

2008 Financial Crisis (USA)

The global financial crisis (GFC) refers to the period of extreme stress in global financial
markets and banking systems between mid 2007 and early 2009. During the GFC, a downturn
in the US housing market was a catalyst for a financial crisis that spread from the United
States to the rest of the world through linkages in the global financial system. Many banks
around the world incurred large losses and relied on government support to avoid bankruptcy.
Millions of people lost their jobs as the major advanced economies experienced their deepest
recessions since the Great Depression in the 1930s. Recovery from the crisis was also much
slower than past recessions that were not associated with a financial crisis.

The 2008 Global Financial Crisis happened because of a lot of different things coming
together.

The 2008 Global Financial Crisis happened because of a few important reasons:

1. Housing Bubble and Subprime Mortgages: Risky loans were given to people
with poor credit history, and when housing prices went down, many couldn't pay back the
loans.

2. Risky Behaviour by Financial Institutions: Banks and other financial companies

took big risks by creating complicated financial products without fully understanding the
risks involved.

3. Lack of Regulation and Oversight: The people who were supposed to keep an
eye on the banks and financial companies didn't do a good job, which allowed risky practices
to go unchecked.

4. Global Financial Markets: Because the world's financial markets are all connected,
when the U.S. housing market crashed, it affected banks and financial companies all over the
world.
5. Failures of Credit Rating Agencies: The companies that were supposed to rate
how safe or risky financial products were didn't do a good job, so investors were misled.

All of these factors came together to create a really bad situation that affected the whole
world. Afterward, there were changes made to try to prevent something like this from
happening again in the future.

Key points

1. Banks and lenders gave out risky loans during the lead-up to the 2008 Global Financial
Crisis.
2. Competition among lenders led to a disregard for checking borrowers' ability to repay
loans.
3. Lenders sold these risky loans as mortgage-backed securities (MBS) to investors.
4. Investors believed MBS to be safe investments, leading to increased borrowing and
investment.
5. Falling house prices resulted in significant losses for lenders and investors.
6. Short-term borrowing made lenders reliant on getting new loans to pay off old ones.