Role of the American Government in Creating the Conditions for the Term Paper

Role of the American Government in Creating the Conditions for the Emergence of the Financial Crisis - Term Paper ExampleThis composition discusses how the US governments requirements for the banking system to provide affordable living accommodations led to a global economic crisis. The greatest mortgage crisis scandal is maybe that it directly resulted from intentional loosening of underwriting standards. This was with the objective of ending discrimination, despite warnings that it could culminate into extensive defaults. Loans were at the core of the financial crisis, which were made with practically non-existing underwriting standards. There was no asset or income verification, no down payment and there was little consideration of the applicants ability to repayRelaxed underwriting standards implied that there would be a considerable reducing or removal of assets, income, savings and credit history as well as the overall repayment capability from the equation. This is in addit ion to permitting products that avoided the criteria for basic favourable lending practices. Banks did not come up with the idea of loosening underwriting standards. The regulators, at progressive political forces and community groups behest, loosened them. This encouraged lenders to offer products and underwrite loans impartially, irrespective of the borrowers repayment capability and financial soundnessDue to globalization and currency integration such as dollarization, goods and services, stock and financial markets, trade and housing have close inter-connection globally, resulting into greater global interdependence. As one of the worlds largest economies, any slowdown in the economy of the United States will inexorably spread to other countries. This is exactly what happened leading to the rapid spread of a severe financial crisis around the world.