Financial Crisis 2007-2009. How Real Estate Bubble and Transparency and Accountability
Issues Generated and Worsen the Crisis
9 January 2016
ECN 171 071
Abstract
The purpose of this paper is to discuss the crisis that took place in 2007 and the impact it
had of the economy during the crisis as well as our economy today. While many theories
float around to what the main cause of the financial crisis is, most believe that the big
banks hold most of the blame of our economy collapsing. Because the market still operated
for many years on bad loans, many wonder what was the final cause for the crisis which
will be analyzed and discussed later on.
Explanation of Topic
What are financial crises? “Financial Crises are the result of the normal functioning of the
economic and financial systems over the course of the business cycle” (Aziz, Bilal, Pg
202). Therefore the financial crisis that occurred in 2007 was the overall outcome of the
banks taking the money of poor individuals and everyone else in the economy just sitting
back turning a blind eye to it until it eventually caused to much debt in our system to
ignore.
The financial crisis was a devastating event and took a big hit on everyone financial and
emotionally. Before the crisis hit, the people of our nations trusted the banks to look after
their money and keep the worlds economy from taking. No one wanted to believe that the
bank workers could get greedy and be the ones screwing everyone out of their money just
to fill their pockets. Therefore when the big news came out that the banks had been
developing more and more money just to keep giving out faulty loans, the news was a
huge shock. Even more to the fact that the banks would pray on poor people with bad
credit to ensure those individuals would need to inquire subprime loans, loans on top of
loans. By doing this, the big banks were making billions of dollars for themselves while
putting a majority of american citizens in homes with a huge amount of debt attached to it.
Assumptions
Over the years since the crisis, many assumptions have been developed as to why this
financial collapse occurred, what the main causes were, how we can avoid it in the future,
etc. Stijn Claessens and M. Ayhan Kose discuss their opinion of the main factors in this
financial crisis in their paper Financial Crises: Explanations, Types, and Implications. They
