The Global Financial Crisis

You are Vice President, Commercial Banking of a regional commercial bank with 200 locations in the state of Florida. You are to prepare for a presentation to the board of directors, and investors. In essence, you will provide information about how the collapse of U.S. housing market results in the global financial crisis and how the global economy suffers its worst crisis since the 1930s. You must include actual statistics to support your ideas.

Here are some hints for your research project:

Originally, the financial crisis started in the United States but soon spread to Europe. European banks were drawn into the financial crisis in part due to their exposure to defaulted mortgages in the United States. As these banks had to write off losses, fear and uncertainty spread regarding which banks had bad loans and whether they had enough capital to pay off their debt obligations. As banks became reluctant to lend money to each other, the interest rates on interbank loans increased. A number of European banks failed and stock market indexes declined worldwide. Investors transferred vast capital resources into stronger currencies such as the U.S. dollar, yen, and Swiss franc, leading many nations to seek aid from the International Monetary Fund.

The financial crisis also spread to emerging economies which generally lacked the resources to restore confidence in their financial systems. Highly leveraged countries, such as Iceland, were vulnerable to the flight of capital. Countries that got rich during the commodities boom, such as oil-abundant Russia, were vulnerable to the global recession. Extremely poor countries suffered from decreases in foreign aid by wealthy countries. Even China experienced a substantial slowdown in growth as the global recession depressed its export markets.

Simply put, the global financial crisis was essentially a crisis of confidence. It started with bad real estate loans and highly leveraged bets on those loans. Then it had frozen credit markets in which banks would not lend to each other and businesses and households could not get the short-term loans needed to finance day-to-day operations.

ANSWER: WHAT IS THE LASTING EFFECTS (UP TO TODAY) FROM CRISIS/WHAT HAS CHANGED?