The Crisis of Credit Visualized Yellow Dig

The credit crisis affected different people both directly and indirectly. The homeowners and mortgage companies were affected directly by the crisis with the house owners losing their houses and savings and the mortgage companies losing their investment in the housing sector. Another sector that was affected by the credit crisis was the insurance industry. This was related to the homeowners who had insured their property at a higher value only for property to be later undervalued. The huge expenses on the high number of the foreclosures negatively affected the mortgages insurers. This was because these properties had been used as a security for the loans. Some insurers were adversely affected by credit default swaps that they had sold on the mortgages as the crisis made these properties to be worthless. 

The financial institutions were also affected by the credit crisis. The financial institutions lost money on mortgage defaults, freezing of interbank lending and credit to the customers, as well as a general reduction in the business activity. Long-term effects in the financial sector included setting up new regulatory action that increased the expenses to these institutions as they sought to achieve compliance.

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The impact of the credit crisis is evident even to date. Among the impacts being felt include the regulations on the financial sector. Basel III is a key regulatory policy that was developed to set guidelines for new capital and liquidity standards for the global banking sector (Chabanel, 2011). Another regulation that resulted from this crisis is the Dodd-Frank Act that mandated the bank holding companies with an asset base of more than $50 million to observe stringent capital and liquidity standards. Another impact felt today is the intensified family homelessness. It was reported that between 2010 and 2013, the number of homeless families in DC rose by 23% (Foster, 2016). 

References

Chabanel, P.-E. (2011). Implementing Basel III: Challenges, Options & Opportunities. Moody’s Analytics. Retrieved from https://www.moodysanalytics.com/-/media/whitepaper/2011/11-01-09-implementing-basel-iii-whitepaper.pdfFoster, D. (2016). Housing Blew up the Global Economy in 2008 and We Learned Nothing.The Guardian. Retrieved from https://www.theguardian.com/housing-network/2016/jan/29/housing-global-economy-2008-the-big-short-financial-crash

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