Hello, I am looking for someone to write an essay on MULTINATIONAL CORP-EVOL & CUR ISSUE. It needs to be at least 750 words.
The country’s policy maker on financial and economic matters, the Fed has adopted lax standards as pertains to trade and lending standards. The Fed had adopted a policy that would stir activity in the economy by increasing the leverage ratios for commercial banks and other financial institutions. The Banks took advantage of this policy by borrowing capital in bulk and use the capital to create massive amounts in subprime loans (Barnett). This made mortgages very affordable and many citizens opted to build or buy their house on a mortgage(s). The amount of household debt in the United States quadrupled by the time the housing bubble burst.
In a bid to clamp down on the rogue nature of banks and avoid the housing debt from growing any further, the Fed tightened its policy on the banks’ leverage ratios. This adjustment would cause the commercial banks to increase the cost of financing mortgages. This proved to be a challenge for many Americans as the new repayment stipulations increased the cost of the mortgage by over 100%. Huge defaulters in payments had their property repossessed causing the burst of the housing bubble.
This bubble was mainly triggered by the increase in disposable income for savings. During the 2000 to 2007 period, there was a great increase and growth in the global fixed income securities. This increase in disposable income encouraged the development of economic bubbles all over the world. As these factors came into play, each bubble burst one after the other as such a business model is not sustainable over time. This led to the overall decrease in the value of assets.
When the fall in value occurred, most banks opted to cut back on lending leading to the credit crunch. This caused a general inability of consumers and governments to borrow stifling investment and consumption. This led to the general decrease in business for companies and corporates as demand considerably decreased (United States Financial Inquiry
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