Reah Jane V.

Galangue BSBA 4-D November 22,2022

BEHFIN

What are the causes of the 2008 financial crisis?  Explain.

There are lot of causes of 2008 financial crisis such as inappropriate or less

transparency in markets, malfeasance by professionals such as dishonest

accounting and deceitful marketing just for their personal advantage, lenders who

gave loans to those who couldn't afford them without restriction, borrowers

who thought they would be able to afford a mortgage were loans they may never

be able to repay or afford and introduction to CDO Collaterized Debt Obligation

that led to bad policies implemented and maintained by regulators.

In Inappropriate or less transparency of makets leads to worst corporate

disclosure standards, less predictable policies, and worst governance that results to

excessive volatility of capital flows. In terms of (CDO) Collaterized Debt obligation, In

2008 there are most weak capital requirements for investors in CDOs. With the

growing popularity of CDOs, home lenders got a steady flow of funds. As a result of

faulty practices imposed and perpetuated by regulators, lenders increased their loan

offerings to riskier borrowers so the main cause here are the Lenders fault and

borrowers fault as well.

Those causes of 2008 financial crisis affect the economy mainly in U.S but also it affect

the whole economy as well. Regulations were framed according to the market.

Therefore, both monetary and fiscal policy were mostly driven by the market and

considered as causes of 2008 financial crisis as well.