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Q.

What is the reason behind us financial crisis?

03 Oct '08 06:38 pm
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Answers (6)

1.

Basically it happended because of prevailing lending practices In US. Lenders started making money by giving loan or credit to people who actually cannot afford the houses they were buying; the lenders assumed that housing prices would continue to rise, so even if the borrower becomes defaulter the lender would still make money. Millions of people have taken such loans, called subprime mortgages; knowingly or not, these people ended up not being able to repay their mortgages. At the same time, housing prices started to fall. So imagine this: a person buy a 50 Lakh Rs house with loan of 45Lakh and a down payment of 5 Lakh. With the initial interest rate, EMI was only 40,000. But then interest rates rose (and these people had Loan with adjustable, instead of fixed, rates on them), and so the payments went up to 70,000 or 80,000. The problem is they don't have enough income to pay that each month and were not able to pay the EMI. Meanwhile, the value of house [which was inflated] fa ...more
Answered by jamal siddiqui, 16 Oct '08 11:13 am

 
  
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2.

Real state slow down, defence spending
Answered by saranathan Narasimhan, 03 Oct '08 09:14 pm

 
  
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3.

The real reason is the change in the attitude of Americans. Their attitude towards work has changed for the worse. They would rather spend their time with PS3 or Xbox than at work. This way incomes and savings do drop. Percentage of people on Government unemployment dole out goes up. There is no money to pay off debts. Financial institutions have to bear the brunt. jThey collapse. People are happy living with Japanese and Chinese products. Their own contribution to their GDP comes down. Its a vicious circle. The Americans have got used to easy living. The average American is below average compared to his counterparts in developing countries. It is their work culture that is responsible for the meltdown.
Answered by Subramanian Mahadevan, 03 Oct '08 07:26 pm

 
  
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4.

Stagnation of property , more houses less takers
Answered by Gaurav Malhotra, 03 Oct '08 07:10 pm

 
  
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5.

Heavy loss is the main reason.
Answered by anantharaman, 03 Oct '08 06:41 pm

 
  
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6.

Its subprime mortgage crisis...now wen u try to expend more than ur means allow u ..........wat ll happen ?????????....................it is like u dont have money to lend but u ll borrow it from somebody and then lend it ....
Answered by ramneesh sharma, 03 Oct '08 06:38 pm

 
  
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