Business Ethics

Answer 1)

The mortgage crisis subprime is a financial crisis, lending confidence that as a rumor growing spreads initially by the U.S. financial markets and is the alarm that puts the spotlight on European subprime mortgages since the summer of 2006 and evidenced the following summer with a stock market crisis. Subprime mortgage are generally considered the trigger for the 2008 financial crisis, the 2008 economic crisis and the crisis of the real estate bubble in Spain. The mortgage crisis, so far (October 2008), has resulted in many financial bankruptcies, nationalizations, constant interventions by central banks of major developed economies, deep declines in stock prices and a deteriorating economy truly global , which has resulted in recession of some of the most industrialized economies. The subprime, known in America as subprime loans , were a special type of mortgage , preferably used for the acquisition of housing , and aimed at customers with poor credit, and therefore with a level of default risk than the average remaining credits. Their interest rate was higher than on personal loans (although the early years have a coupon interest rate) and bank charges were more onerous. U.S. banks have a limit to the granting of such loans, imposed by the Federal Reserve. Since the debt can be sold and economic transaction by buying bonds or securitization of credit, sub prime mortgages could be removed from the asset side of the concessionaire, being transferred to investment funds or pension plans. In some cases, the investment was made ??through so-called carry trade. The problem arises when the investor (which may be a financial institution, bank or individual) the true risk assumed. In a global economy , in which financial capital circulating at high speed and change hands frequently and offering financial products highly sophisticated and automated, not all investors know the ultimate nature of the contracted operation. The explosion of the sub prime mortgage crisis followed the decision of some banks to "freeze" the shares of its investment funds, suspending the sale to prevent depreciation. In other cases, creditors have declared their insolvency and there have been cases of failure, which led to a generalized decline in securities on the stock exchange in various fields. This is due to the role of the banking system for the entire economy, the fact that in various stock exchanges (such as the FTSE-MIB) bank stocks are those with highest capitalization and the most traded daily, so their decline weighs heavily on the index overall stock market, the fact that the insolvency of the creditor has an impact on all its debtors, with the difficulty to renew maturing loans at subsidized rates and to grant extended payment terms, many industries that have a debt that is a multiple of their capital (McLean, 2010).

Answer 2)

From the global financial crises it is clear that the sub prime mortgage issue was the biggest cause. Consumers who did not had enough money for their own purposes, mortgaged their homes and houses and borrowed 3 times ...