How did culture of irresponsibility lead to 2007 financial crisis?
America President Obama said that the culture of irresponsibility was the most important cause of 2007 financial crisis (CBSNEWS, 2009). He pointed out that it was a failure of the entire system, mainly the failure of government and the irresponsibility banks. He also said ‘millions of Americans who have worked hard and behaved responsibility have been seen their life dreams eroded by the irresponsibility of others and the failure their government to provide adequate oversight. Our economy has been undermined by that failure.’ (CBSNEWS, 2009) His finger only pointed at the government and banks, but no individuals. Do you think customer do not have any responsibility in this financial crisis? Are they just act as a victim in this disaster? Do they have chance to change their destiny? No one can evade their responsibility in this crisis. Even if you are just a customer or household, you should take responsibility for your own fault, as no one is forcing you to invest.
Many economists believe that 2007 financial crisis is the worst crisis since the Great Depression of the 1930s, it influenced everyone in this economy. 2007 financial crisis resulted to the collapse of large institutions, downturn of stock market, serious unemployment, decline of us stock market, decrease of GDP and deepening the unequal of distribution of wealth etc. Basically everyone is affected by this crisis. There is 5 stages of main processes which affecting the economy the most.(the guardian, 2011) Let’s begin with 9 August 2007, BNP Paribas SA suddenly announced to freeze the investment of the US subprime mortgage. A billion of dollars suddenly disappeared in a night. It almost caused the banking system halted, the financial crisis erupted. (bloombery, 2007) After a year, the crisis problem was getting worst and it came to the peak. On 15 September 2008, investment bank Lehman Brothers went bankrupt. Before this happened, everyone thinks that government must help bank to bail out, when government allowed Lehman Brothers went bankrupt, people realized that every bank has a risk of bankruptcy. This forced the western government to inject a large amount of money in order to prevent bankruptcy happens, but it was too late. When everyone’s confidence collapsed in the economy, the credit flow started stagnating. During 2008-2009, developed and developing nations started co-ordinating and created a groupr-G20, trying to stop the recession getting worst. 9 May 2012 IMF and the European Union provided a huge amount of financial help to Greece. (The New York Times, 2010) It implicated that the problems was beyond the ability of banks and switched it to government. Afterwards, the debt crisis of Ireland and Portugal getting worst, financial crisis began to spread to the core countries from the surrounding countries. 5 August 2011, US credit rating downgraded to AA+ by Standard & Poor’s. (the guardian, 2011). This rise the borrowing costs for the American government companies and consumers and also led to unpredictable turbulence in global financial market.
Obama queried: ‘Do you think we got in the worst economic crisis since the great depression because of too much government regulation?’ Not just the regulation, the decisions of government brought a significant impact to the society.
2007 financial crisis is also called subprime mortgage crisis. Undeniably, government cannot launder his accusation that the deregulation, excess regulation and failed regulation indirectly detonated the financial crisis. The government polices suddenly became a catalyst of this fire. ‘Weak financial regulation in advanced economics-regulation that was poorly designed, impractical, and inconsistent across institutions and market segments, not to mention