Saturday, January 4, 2020
Financial Crisis Essay - 1088 Words
Marconi (2010) believes that the role played by the institutional investors propagated the financial crises. Institutional investors, which is both, individual or companies do enjoy the benefits of reduced commission preferential regulations. This is due to their large and professional investments. Institutional investors like the mutual funds, pension funds, hedge funds like Magnetar Capital, and Life insurance companies like the AIG and investments trusts contributed to the global financial crises of 2007-2008. This financial crisis also referred to as the great recession was triggered by liquidity problems in the United States economy. Many large financial institutions collapsed according to Geczy (2010). The government had to bail outâ⬠¦show more contentâ⬠¦There were breaches in accounting practices and general breach of business ethics. The bank directors and the chairman are accused of having certified false financial statements and not disclosing key financial practice s in the bank. Among the undisclosed practices was the Repo 105. The Lehman had been using it from 2001, it involved using the Repos to finance assets and treating them as sold Repos while accounting. This according to the report was abuse of ordinary repurchase agreements, it was done to lower the banks leverage as was asked of investment banks toward the end of 2007. The bank at times even involved its subsidiaries. Financial leverage should have been attained by borrowing and investing the same at higher interest rates. The auditors Ernst Young have been accused of professional negligence for failing to disclose these practices thus misled the investors on the financial status of the bank. Some critics cite the complex financial systems and financial investment products to have been the trigger of the 2007-2008 financial crises. According to Laurence (2010), other factors include: failure of effective regulations in the investment markets, inappropriate credit interests, and self interest practices among the institutional investors. According to Hughes (2011), some critics also argue that the institutional investors were behaving in irrational mannerShow MoreRelatedSpanish Financial Crisis1063 Words à |à 5 PagesSpanish financial crisis Introduction (source: Wikipedia) The 2008ââ¬â2010 Spanish financial crisis is part of the world economic crisis of 2008. In Spain, the crisis was generated by long term loans (commonly issued for 40 years), the building market crash which included the bankruptcy of major companies, and a particularly severe increase in unemployment, which rose to 13.9% in February 2009. 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