The triggering element of the present financial crisis was the real-estate crisis in the United States. The crisis began with certain indifference in 2006, but then it reached its peak during the second semester of 2008. This was when we observed, day after day, a fall in prices of shares, simultaneously in all the financial centers and activities sectors, along with bankruptcies of certain prestigious banking institutions, as well as serious and expensive internal dysfunctions in many others. These events have led to unusual interventions from the public authorities. These interventions became more and more massive and were coordinated with the view of containing the crisis confidentially. This was done to contain the crisis in the functioning of the financial systems and to limit the gravity of an economic recession in developed countries, with its predictable social consequences. Since the beginning of 2007, certain economists had tried to warn the authorities and the markets on the financial risks ensuing from the increasing debt of the United States, of the insufficient savings in the country, and the potential dangers arising from the volumes of securitized credits. If nobody paid attention to those warnings, particularly in 2007 and during the first semester of 2008, it is because the world growth was still significant, pushing the prices of all assets, up (raw materials, in particular) and therefore the majority of the actors involved believed that this stock-exchange situation, which showed consequent profits, could still last, maybe forever. They were incited to take their stands through sophisticated mathematical approaches of the risk factor, greatly reducing human responsibilities on decisions. Furthermore this dangerous situation was compounded by the weak audience to the predictions of doom as well as the wide range of conflicting opinions on the subject. In September 2008, awareness was finally made public on the occasion of the bankruptcy of the American bank Lehman Brothers. The world was facing a banking crisis of major proportions.
[...] The crisis had effects on other markets, such as the one of raw materials. According to the analyst John Kilduff, " it is an contagion effect: what is happening on the stock exchanges markets caused a drying out of liquidity, obliging several actors, as hedge funds, to leave the market of the energy and to liquidate their positions”. Thus, the producing economies and the emerging economies were hit even more seriously Consequences on the economic sector There is not just, on one side the fragile financial economy, and on the other side a solid "real" economy, without any connection. [...]
[...] The European Union and the United States use the standard "IAS 39" by authorizing reclassifying of financial instruments, in the case of a slump in prices, between those intended to be held until the term (not estimated in the "fair value" depending on the market value) and the others (Ricol 2008) Badly adapted regulation The regulation lets certain unregulated areas of professions or products threaten the whole financial system. These "areas" can be made up of not banking institutions, offshore centres or fiscal paradises. If the measures imposed by Basel II already improve the consideration of certain operations of banks' off-balance sheet commitments, it remains that all the incapacities of the regulations must be examined (Couppey-Soubeyran 2008). Furthermore, over the counter markets (private contracts and unregulated markets) are not checked and are not even treated statistically. [...]
[...] We call systemic risk the risk that a particular event leads to, by chain reactions, considerable negative effects on the whole system which can cause a general crisis of its functioning. It is important in the banking and financial system, because of the interrelations existing in this sector between the various institutions and the various markets. The systemic risk of the financial sector is really dangerous because the negative effects spread to the economy at large The investors In a period of plentiful liquidity, the returns obtained on capital markets seemed weak. Therefore, too many investors, either institutional or private ones, were attracted to products with superior rates of profitability. [...]
[...] Nevertheless, the crisis hardly affects the banking sector. Victim of the crisis, the German public regional Sachsen LB bank was purchased by the LB Baden-Württemberg (LBBW). LBBW is the first German regional bank, with an asset estimated at 428 billion euro in 2006. It was the only regional bank still independent from former East Germany, and Sachsen LB thus became the property of the most powerful regional banks of West Germany (Linden 2007). HSH Nordbank AG, West LB, IKB and Bayern LB have also been hit by the crisis and have received funds from SoFFin (Financial Market Stabilisation Fund set up by Germany) (Brown 2009). [...]
[...] The triggering element of the present financial crisis was the real- estate crisis in the United States. The crisis began in a certain indifference in 2006, but then it reached its peak during the second semester of 2008 when we observed, day after day, a fall in prices of shares, simultaneously in all the financial centres and activities sectors, along with bankruptcies of certain prestigious banking institutions, as well as serious and expensive internal dysfunctions in many others. These events have led to unusual interventions from the public authorities, interventions which became more and more massive and coordinated with a view to contain a crisis of confidence in the functioning of the financial systems and to limit the gravity of an economic recession in developed countries with its predictable social consequences. [...]
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