Sunday, April 28, 2019

Financial crisis 2008 for corporate governance & ethics course Case Study

Financial crisis 2008 for corporate governance & ethical motive course - Case Study ExampleMoral hazard occurs when a party to a take away understanding that the consequences of their actions will be borne by a different party puts themselves under more risks. This constitution aims at analyzing the characteristics that make the 2008 financial crisis an ethics and specifically moral hazard situation and the measures taken for in effect eradicating the recession.Reasons for the 2008 financial crisis include massive nationwide residential housing bubble, financial sector overleveraging, unregulated subprime modify growth at a large rate, and lack of transparency in new, complex, and more popular owe based funds. The other reasons for the global financial crisis in 2008 was resultant inability to measure risk, screening of borrowers and desire lending of precarious loans and lack of concern on ability to pay with main aim beingness origination of loans (Dowd, 143). These factors t hat resulted in the financial crisis shows the blatant disregard by the financial institutions of the needs of the stakeholders through pickings on precarious loans depicting an example of the lack of ethics or moral hazard situation. Securitization and subprime mortgage origination rose until 2006 when household debt was 100% of US GDP, causing rising interest rates making refinancing difficult and drop of housing prices and 1.3 million housing projects were on foreclosure in 2007, the crash had began. The proceeding days would be so tough for banks and other financial institutions owing to bank runs and collapse including certain governments that depended so much on foreign market loans.The crisis could have been prevented through a reduction in the bailouts or the expectation of bailouts by firms since set precedence for firms to invest in risky activities. This is because when these activities are successful the investors benefit, but in case of failure, there are bailout by t he government. Having a law holding each individual responsible for the risky actions that led to the

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