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Journal of Management Research and Analysis


MULTIDIMENSIONALITY OF US FINANCIAL CRISIS OF 2007-2009


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Author Details: Anjala Kalsie, Ashima Arora

Volume : 2

Issue : 2

Online ISSN : 2394-2770

Print ISSN : 2394-2762

Article First Page : 115

Article End Page : 122


Abstract

A financial crisis of 2007-09 which started in advanced nation such as United States intersected with the freezing financial markets of the world economies and the suspended global trade, thereby transmuting into a global recession of intense gravity. The objective of this paper is to analysis the causes leading to such intense financial crisis which has hit the world at large. The leading indicators of financial crisis were securitization of mortgages, loose monetary policy stance adopted by the Federal Reserve, Basel norms which incentivized the investments in the mortgages, sovereign debt and GSE-sponsored mortgage backed securities more than the commercial and corporate loans, the rating agencies which awarded the lowest risk, high return ratings such as AAA to these assets, the inflationary pressure, substantial deregulation of the financial sector, bad computer modelling were the additional causes which helped in spreading the contagion of financial crises.


Key Words: Financial crisis, Regulatory framework, Rating agencies, Subprime lending, Global imbalance.