...“How Mortgage Crises in United States has affected Turkish Real Estate Sector?” Muhammet Çağlar Kılınç Cansu Sugün The U.S Mortgage Crises was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. This caused an economic recession and in 2008-2012 it is called Global Recession due to the negative effects in the global sense. There are number of factors that lie behind these crises in both housing and credit markets. These factors emerged over a number of years. Causes proposed include the inability of homeowners to make their mortgage payments, overbuilding during the boom period, risky mortgage products, increased power of mortgage originators, high levels of debts, bad monetary and housing policies, international trade imbalances, and inappropriate government regulations. In January 2011 The U.S Financial Crises Inquiry Commission reported its findings. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding...
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...The Mortgage and Financial Crises: The Role of Credit Risk Management and Corporate Governance William W. Lang Federal Reserve Bank of Philadelphia Ten Independence Mall, Philadelphia, PA 19106 Phone: 215-574-7225 E-mail: William.Lang@phil.frb.org Julapa Jagtiani Federal Reserve Bank of Philadelphia Ten Independence Mall, Philadelphia, PA 19106 Phone: 215-574-7284 E-mail: Julapa.Jagtiani@phil.frb.org February 9, 2010 Abstract This paper discusses the role of risk management and corporate governance as causal factors in the onset of the financial crisis. The downturn in the housing and mortgage markets precipitated the first phase of the financial crisis in August 2007 when the solvency of a number of large financial firms was threatened by huge losses in complex structured financial securities. Why did these firms have such high concentrations in mortgage-related securities? Given the information available to firms at the time, these high concentrations in mortgage-related securities violated basic principles of modern risk management. We argue that this failure was a result of principal-agent problems internal to the firms and to breakdowns of corporate governance systems designed to overcome these principal-agent problems. Forthcoming in Atlantic Economic Journal (2010) JEL Classification Numbers: G01, G18, G21, G28 Keywords: Financial Crisis, Risk Management, Corporate Governance, Subprime Crisis _________________________ The opinions expressed in this paper...
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...As far as we know, there were more than five economic and financial crises during the recent 200 years. Society was suffering from such downturns, because each of them had its own characteristics and consequences which affected the whole economic world. In the next passages I would like to tell you about the history of financial crises and about the solutions made by governments and departments which helped to reduce the bad effects of it. Not a single year has gone by in the past two centuries where there was not a financial crisis somewhere in the world (see figure 1). Arguably, the world witnessed its first international financial crisis in 1825. The opening up of Latin America after the overthrow of the Spanish empire led to the opening up of international trade between England and the Latin American republics. The result was massive capital flows from London to finance infrastructure, mining and government spending. But once the capital outflows impinged on the Bank of England’s (BoE) gold reserves, the policy rate was raised, leading to a banking crisis. A sudden stop of capital flow from London resulted in banking panics in the US and currency crashes across Latin America. Figure 1: The history of financial crises Indeed, the crisis in 1825 marked the first of seven clusters of sovereign defaults in the period 1800 to 2010 In the first cluster of defaults, which happened during 1824-1834, 13 Latin...
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...beyond national borders, whilst increasing the interconnectedness of different markets and cultures. These economic ties come in the forms of international trade, foreign direct investment and monetary integration, made possible with the complementary increase in the interdependence of international financial markets. With further liberalization and deregulation, financial market interdependence grew in momentum alongside the worldwide capital mobilization. This growing interconnectedness of all the world financial markets and the degree of their interdependence have themselves created a subject of substantial interest among economists. The recent global financial crisis has only elevated this interest further, as the impact of U.S. subprime crises on the world economies have provided evidence of global financial markets interdependence. Many international stock markets, for example, experienced their worst abrupt declines in their history with drops of around 10%, triggered moments after the collapse of Lehman Brothers hit the U.S. financial markets. Even the Bursa Malaysia KLCI was not spared, dropping to its lowest point in...
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...Zombie Bank The book presents an in-depth overview on what a zombie banks is, why they are allowed to operate, and why the approach will inevitably fail. Through the use of exclusive reports from bank executives, regulators, politicians, and policymakers, Onaran takes the reader on a global tour of these banks—which are being kept alive in countries from the United States to Germany, Spain, and Japan. Two of the largest, Bank of America and Citibank, are in the United States. In Zombie Banks, the author has shown us the practice of zombie banking, explained why it does not work, and laid out the steps needed to rid the global financial community of these dangerous institutions. Zombie bank started to appear in 1990s with the huge declining of the price of real estate and stocks. It pulled every Japanese banks into huge bad debt situation. However, Japan refused to accept the suggestion from the US and took a way that government secretly support those bad debt banks instead of bankrupt. This solution do nothing good to the improvement for its financial situation and made Japan’s economy depressed for a decade. While covering the collapse of Lehman Brothers and Bear Stearns in 2008, Onaran discovered that no one within those organizations had the complete picture of how the companies functioned and, therefore, no one had any answers. Zombie Banks is Onaran’s attempt to connect the dots that make up the current global financial landscape. Zombies are...
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...Throughout the history and even today we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis? There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. There a lot of types of financial crisis: banking crisis, speculative bubbles and crushes, wilder economic crisis and other crisis. But from all of them, today the most frequent financial crisis is the banking crisis. This happens when a lot of the depositors withdraw their deposits from the bank, causing the bank to bankrupt. This kind of crisis happened in 2007-2008,also known as the global financial crisis and 2008 financial crisis. This crisis is considered by many economists to be the worst financial crisis since the Great Depression. This crisis was called the worst because it was spreading really quickly all around the world. But what causes this kind...
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...Syndicate group assignment What were the origins of the Asian currency crisis? The Asian currency crisis was a period of financial crisis started in Thailand in July 1997. Many Asian countries experienced a financial crisis are a large drop in the value of its currency and a large drop in its traded equity prices. Before the crisis happened, many Asian countries produced a dramatic reduction in poverty and rapid economic growth. Behind the boom, there are lots of imbalances: large current account deficit was financed increasingly by short-term inflow; the real exchange rate had appreciated to an unsustainable level; and export growth had slowed obviously. Based on a literature review, a great deal of effort has been made to trying to understand the origins of the crisis. One view is that weaknesses in Asian financial systems were at the root of the crisis. The lack of incentives for effective risk management created by implicit or explicit government guarantees against financial failure caused the weaknesses. The large capital inflows, rapid economic growth and pegged exchange rates also accentuated the weaknesses of the financial sector. An alternative view is that there was not anything wrong with East Asian economies with historical good performance. The large capital inflows to finance productive investments made them vulnerable to a financial panic. The inadequate policy responses to the panic caused the financial crisis and the...
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...IT and International Real-Time Media: Amplifier for a Crisis or Instrument of Rational Decision-Taking Narelle Gomes, Christian Piechorowski 09.01.2014 Table of contents: 1.1 Information technology’s impact in the development of the stock exchange 1.2 Algorithmic trading 1.3 High frequency trading 1.4 High frequency; trading beneficial or harmful for the economy? 1.5 Final Remarks 2.1 The Influential Role of Mass Media - The Pervasiveness of the information disseminated on the people 2.2 Financial Crisis- A media spectacle? 2.3 The mishaps of European Media during the current Euro crisis 2.3.1 The alternative view of the media; Citizens mistrust towards the media 2.3.2 The wavering power of mainstream amidst its pervasiveness 3. Conclusion Introduction Problem Description: The world financial crisis started in the US with the burst of the housing bubble in 2007. However, it was not just limited to the US border, but it rapidly spread all over the world. Consequently, many banks went bankrupt and some countries were even pushed into a financial downturn. Target of Study: This essay will not provide a general outlook on the financial crisis but instead examines the impact of the Real time media and IT on this economic crisis of historic scale. How important...
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...THE EAST ASIAN CRISIS Introduction: The East Asian crisis was a period of financial crisis that gripped much of Asia which beginning in July 1997 and raised fears of worldwide economic meltdown due to financial contagion.1 Several countries such as Malaysia, Thailand, Indonesia, the republic of Korea and the Philippines were hit directly while others such as Taiwan province of China, Singapore and especially Hong Kong, China were badly affected. What began as a speculative attack on the Thai baht in July 1997 quickly spread as ‘contagion’ to the other countries. Over a three-month period between July and October 1997, the baht fell nearly 40 per cent, the Malaysian ringgit and Philippine peso by about 27 per cent, the Indonesian rupiah by about 40 per cent and the Korean won approximately 35 per cent against the United States dollar. For countries that had been dubbed “miracle economies” this was a serious blow with wide-ranging economic, social and political ramifications.2 In this paper we would try to undertake an empirical analysis of the factors leading to the crisis by analysing on two major points: 1) How have these countries performed in the years leading to the crisis? 2) What was the policy response to the currency crisis and what similarities/differences were there in policy responses across countries? We try to do this by analysing the macroeconomic data of three countries, Malaysia, Thailand and the Republic of Korea, over a 13-year period, from 1990 to 2002. The...
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... Indeks: 9532 Strumica,dekemvri 2012 Throughout the history and even today we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis? There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. There a lot of types of financial crisis: banking crisis, speculative bubbles and crushes, wilder economic crisis and other crisis. But from all of them, today the most frequent financial crisis is the banking crisis. This happens when a lot of the depositors withdraw their deposits from the bank, causing the bank to bankrupt. This kind of crisis happened in 2007-2008,also known as the global financial crisis and 2008 financial crisis. This crisis is considered by many economists to be the worst financial crisis since the Great Depression. This crisis was called the worst...
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...TABLE OF CONTENT | PAGE | | 1.0 | Introduction | 1-2 | | | 1.1 | Bank CEO incentives | 2 | | 1.2 | Credit Crisis | 2 | | | | | 2.0 | Bank CEO incentives were the major factor in credit crisis | 2-5 | 3.0 | Conclusion | 6 | | | | 4.0 | References | 7 | 1.0 Introduction Bank CEO and the credit crisis was it related to each other? There is a statement which is ‘Bank CEO’s incentives were a major factor in credit crisis.’ First of I would like to explain a few terms in the topic. A CEO stand for Chief Executive Officer meanwhile, incentives here doesn’t only mean money or material incentives. It also includes motivation either positively or negatively towards the CEO. Therefore, the statement says that the lack or abundance of incentives to the CEO is the major factor for the past credit crisis. CEO incentives were not the major cause for the credit crisis based on my research from the journals and articles. I totally oppose these because I have gathered valuable evidences from journal and articles that I have read online. 1.1 Bank CEO Incentives There are several titles for the position Chief Executive Officer (CEO) such as Managing Director, Executive and President. The responsibility of CEO is different from one another according to their size, scope of work and an organization. CEO plays an important role by making a decision, hiring of staff. Besides that, CEO will have communication deal with board of directors and corporate...
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...here are conflicting views on how the global financial crisis is affecting medical tourism. The view expressed by organisations such as the Medical Tourism Association is that the "...with the economy and the credit crisis, more people are waking up and paying attention (to medical tourism)." The harsh reality may be somewhat different. BusinessWeek reports that "...in some medical tourism hotspots, formerly booming hospitals are seeing empty beds." The MD of Parkway Hospitals in Singapore, "expects the foreign patient numbers to stabilise after dropping 10 per cent". Whether the credit crunch encourages more people to consider travelling abroad for treatment remains to be seen. People are short of cash, unable to borrow and are delaying expenditure on house purchases, cars and other major expenditures. Healthcare is not immune to this. Although in the last global recession, healthcare was less affected, the likelihood is that people who might have considered medical tourism may decide to postpone their expenditure. Areas likely to be affected most are those “non-urgent”, discretionary treatments such as cosmetic surgery. In countries where medical tourism is influenced by waiting lists, patients may decide to hold out for free treatment in their own country rather than go for the paid for, immediate treatment available elsewhere. In the USA, the story may be different, as the financial crisis puts pressure on health insurers and employers to find ways to cut rising healthcare...
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...Journal of Contemporary Eastern Asia ISSN 2383-9449 Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun (2012) Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Journal of Contemporary Eastern Asia Vol. 11, No. 1: 43-56 Journal abbreviation: J. Contemp. East. Asia Stable URL: http://eastasia.yu.ac.kr/documents/Fumitaka_11_1.pdf www.JCEA-Online.net Open Access Publication Creative Commons License Deed Attribution-No Derivative Works 3.0 Journal of Contemporary Eastern Asia, Volume 11, No.1: 43-56 http://dx.doi.org/10.17477/jcea.2012.11.1.043 Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun The paper chooses the “Asian Financial Crisis” as a case study to examine its impact on Malaysian economy and describes how Malaysian government responded to the crisis. It also focuses on the Asian financial crisis’ impact on the employment of banking sector in Malaysia. In the finance, insurance, real estate and business service sector, a number of 6,596 workers were retrenched. Banks were forced into mergers and acquisition as well as downsizing, trim lean, organizational changes and introduction of new technologies. Excess workers were offered a “voluntary separation scheme.” These retrenched workers became the urban poor facing high cost of living and no opportunity for jobs as there is no safety net provided. 1. Introduction...
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...has inherent risk management tools to prevent the crisis. This paper attempts to examine the root of the financial crisis and find the solution from Islamic finance principles. Keywords: Financial crisis, Derivative, MBS, CDO, CDS, Islamic finance 1 Corresponding author can be contacted by email: miranti_k_dewi@yahoo.com. “The credit and capital markets have grown too rapidly, with too little transparency and accountability. Prepare for an explosion that will rock the western financial system to its foundations.” (Barberton and Lane (1999) INTRODUCTION As mentioned by Barberto and Lane (1999), the explosion just became a reality. Though the crises in the US and Europe were one of the crises series which regularly hit the world starting from the 20th century,...
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...hsbc2.Where is HSBC venerable? What should it watch out for? Answer: HSBC venerable are : HSBC associates itself strongly with investment in the small business sector, but the current economic situation has led to increased risks, potentially compromising the activity levels in this area of the operation. The bank was involved with sub-prime markets in the US and has had to write off large figures lent to high-risk borrowers. Despite falls in the UK interest rate, HSBC has increased its mortgage rates. This may be perceived negatively by borrowers and potential borrowers, adds pressure to an already depressed housing market and could ultimately lead to more defaulting as borrowers struggle with higher repayments. A redundancy program announced recently may affect morale among staff, leading to decreased production and loyalty. HSBC’s branding emphasizes its global presence, and this may be seen negatively by some customers in its implication of homogenization and lack of personalization. Along with the strengths, HSBC has got some weaknesses too. The major weakness that is evident to even a lay man 's eye is that they have a very little foot print and hence despite having operations in several countries , it has less exposure to the much larger and potentially profitable market which is there and already being exploited by other Banking Financial organizations , especially in Asian region Decide which weaknesses...
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