2008 Financial Crisis Summary
Since the year 2006, the investors in U.S observed that their invested wealth was getting …show more content…
By the year 2007, the markets particularly the prime-mortgage exhibited high rates of defaults compared to the normal rates. In furtherance to the same, the collateralized-mortgage-obligations (C-M-O) which in this regard is a collaterized type of debt commitments allowed escalation of these problems from the mortgage to the rest of the economy sectors. This had a widespread repercussion on the entire financial markets at large. C-M-O were the securities that were backed up by mortgages that were issued by the investment financial institutions such as banks. However, these financial institutions were then not part and parcel of the commercial bank system. Therefore, with the falling value of the mortgage had a ripple effect on the value of securities, which in this respect fell.
Besides, the issue of financial crisis was furthered by