Essay about Financial Crisis

Essay about Financial Crisis

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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 out some banks and this resulted in a decrease in the stock and money funds investments in the United States and spread on all across the globe.
A report compiled by the U.S Financial Crises Inquiry Commission shows that the infamous global crises could have been avoided. It pointed out that failure in different financial institutions including the Federal Reserve accelerated the crises. Lehman brothers; one of the three largest investments banks in the United States has been cited in the financial crises in 2007. The bank went bankrupt and it had to be sold in September 2008 (Currie, 2010). The other two banks Morgan Stanley and Goldman Sachs had to become commercial banks where more regulation was done. The collapse of large and significant financial institutions like the Lehman Brothers propagated the economic crises. Investors withdrew over $150 billion from the money funds in the USA in two days after the collapse of the Lehman Brothers. This caused the money markets to get unstable thereby nee...


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...uest.com/
Laurence B., 2010. Research Foundation Of Cfa Institute, Scu
Leavey School Of Business Research Paper No. 10-04. Available At: Ssrn:
Http://Ssrn.Com/Abstract=1523931
Manconi, Alberto, Massa, Massimo and Yasuda, Ayako, 2010. The Role of Institutional
Investors in Propagating the Crisis of 2007-2008. UC Davis Graduate School of
Management Research Paper No. 04-10. Available at SSRN:
Shefrin, Hersh M., 2009. How Psychological Pitfalls Generated the Global Financial Crisis.
Voices Of Wisdom: Understanding The Global Financial
Quinn James, 2011. JPMorgan, Citigroup helped trigger Lehman collapse, report argues.
Retrieved from: http://www.telegraph.co.uk/finance/financialcrisis/7424849/JPMorgan-Citigroup-helped-trigger-Lehman-collapse-report-argues.html
Valuka Anton R. S., 2010. Retrieved from:
http://lehmanreport.jenner.com/VOLUME%205.pdf

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