When investors and other leverage financial intermediaries are forced to sell their assets in a hurried manner in order to meet up with the lenders calls, is known as Financial Panic. And whenever, interest rates increases, or when the value of collateral pledged to repay the loan drop in values or sink below the amounts the borrowers owes, that’s when the Lenders calls loans or ask for their loans repayment. Calls are normal and very important in our business on daily basis; however, in the time of financial panic, they all come in a massive way due to some shock that often lead to the bursting of asset bubbles. “Bubbles” is bound to burst whenever it’s triggered by an evident shock, such as natural catastrophe or when an important company
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Perpetually, this leads to some investor’s inability to sell assets quick enough or for a high price to meet up with the deadly calls to repay their loans, especially the ones with the highest leverage. Other Lenders and Bank begins to suffer the consequences due to the bubbles. The Lenders, other banks, depositors, and holders of commercial papers started wondering if they are still credit-worthy. Lender begins to induce restriction in crediting due to Asymmetric and uncertainty, which leads to the point where emotions take over investor, and they plainly go into panic which propels Tony Soprano to panic attacks like an individual who take a stroll in a park as described in Chapter 11 “The Economic and Financial Regulation”. The rapid de-leverage of financial system are often cause by Financial Panics, a time a credit crunch or a period when interest rates for riskier types of loans and securities increases, or an enormous decrease in the volumes of lending take place. A period of uncertainty that enhance high interest rates and tight credit as well as the high expectation of lower assets price in the future, that result to assets values to drift downward, to some instances that’s well below the values that’s indicated by underlying economic ground
Perpetually, this leads to some investor’s inability to sell assets quick enough or for a high price to meet up with the deadly calls to repay their loans, especially the ones with the highest leverage. Other Lenders and Bank begins to suffer the consequences due to the bubbles. The Lenders, other banks, depositors, and holders of commercial papers started wondering if they are still credit-worthy. Lender begins to induce restriction in crediting due to Asymmetric and uncertainty, which leads to the point where emotions take over investor, and they plainly go into panic which propels Tony Soprano to panic attacks like an individual who take a stroll in a park as described in Chapter 11 “The Economic and Financial Regulation”. The rapid de-leverage of financial system are often cause by Financial Panics, a time a credit crunch or a period when interest rates for riskier types of loans and securities increases, or an enormous decrease in the volumes of lending take place. A period of uncertainty that enhance high interest rates and tight credit as well as the high expectation of lower assets price in the future, that result to assets values to drift downward, to some instances that’s well below the values that’s indicated by underlying economic ground