The Global Financial Crisis of 2008

The Global Financial Crisis of 2008

The global financial crisis of 2008 is one of the worst economic disasters to have hit Europe after the Great Depression of 1929. The tragedy hit Europe despite the efforts from the Federal Reserve and the Treasury Departments to calm the Europe’s economic turbulence (Fassin & Gosselin, 2011). The Global Financial Crisis of 2008 had ethical concerns which swept across the affected governments and the organizational leaders. Federal governments and corporate leaders faced ethical issues emanating from the mortgage brokers, subprime mortgage lenders, and to the securitization of mortgages. The organizational leaders who managed the rating firms were incompetent regarding the assignment of investment ratings and the collateralized debt obligations. The leadership of the regulatory agencies and the Security Exchange Commission (SEC) failed to review the required adequate disclosures in the supplemental prospectus for banks (Elliott, 2011). Consequently, the international banks failed to underwrite the criteria used to assemble the pooled loans, thus presenting one of the significant ethical concerns during the 2008 global economic tragedy.

States, global leaders, and federal personnel agreed to perform coordinated actions to prevent the recession from becoming a slump. A group of 19 countries and the European Union together formed the G20 to subvert the effects of the crisis (Elliott, 2011). In the London G20 Summit, the federal personnel and the global banks agreed to cut the interests rates to the marrow. Moreover, various sizes of the fiscal stimulus packages were announced coupled with the creation of electronic money via quantitative easing. The fiscal leaders and the global personnel present at the summit committed to a $5 trillion fiscal expansion to aid the International Monetary Fund (IMF) and other financial institutions (Elliott, 2011). The deal was meant to boost growth and champion for the transformative agenda for the banks.

The Global Financial Crisis of 2008 was brought to an end after the implementation of the strategies proposed by the various organizations such as the G20. The pressures which led to proposals from the G20 organization and other federal leaders were informed by the fact that there was mistrust within the global banking society (Fassin & Gosselin, 2011). There was a rise in interbank borrowing costs (Libor) which went unaccounted for years before the crisis. The decision to cut the interests rates was to subvert the lack of moral integrity among the members of the society and companies which would park excess cash in these banks and earn interest on it overnight. The transformative agenda proposed by the members of the G20 Summit was due to the pressure from the banks which made short-term loans using the excess cash pumped by the companies (Elliott, 2011). The strategy would prevent ethical issues concerning the run on money market funds.

Strategies to end the Global Financial Crisis of 2008 brought sanity into the banking sector of the United States. There are better accountability schemes, lending and borrowing limits, and interest rates which match every financial projection (Elliott, 2011). During the peak of the crisis, there were unethical lending by the banks and major financial institutions in the United States. There were additional ethical concerns since aggressive lenders engaged in the subprime mortgages which were of extremely high risks (Fassin & Gosselin, 2011). The current ethical trends in the lending sectors in the US calls for proper underwriting standards before the issuance of such loans. The whole society puts much weight on successive incidences which would propel the country away from the global crisis pole as witnessed in 2008. The society has gained unprecedented levels of financial discipline which assists the financial institutions, and the fiscal policymakers settle on amicable strategies for economic growth.

References

Elliott, L. (2011). Global financial crisis: five key stages 2007-2011. The Guardian, 7.

Fassin, Y., & Gosselin, D. (2011). The collapse of a European bank in the financial crisis: An        analysis from stakeholder and ethical perspectives. Journal of Business Ethics, 102(2),     169-191.