FINANCIAL SHOCK

Financial Shock

Financial Shock

Introduction

The main purpose of this paper is to make a critical analysis of the thesis written by Mark Zandi's on Financial Shock. Zandi is a cofounder of Moody's and he wrote a thesis on the financial shock prevailing in the US. Zandi in his writing said that the main reason of these bursting bubbles in US is that the people of America are not financially literate. They do not have much knowledge about how to maintain their financial position and how the financial stability can be made in the country. In his article he gave some logical advices to the financial policy makers.

Discussion

In his thesis Zandi has written a lot about the history. He has given a full detailed history as what actually occurred in the history and what are the main causes of this financial burst. If you go through Zandi's book you will find valuable information in his book. He has given lot information in his book regarding the ways which could be helpful for the financial analysts to keep the financial position stable.

According to economist Mark Zandi of Moody's fourth of 2.45 trillion of subprime mortgages are held by households insolvent or in difficulty and overall losses of the banking sector could amount to 225 billion dollars. A recent study by the Deutsche Bank is more pessimistic and assesses those losses at $ 400 billion. On this amount between 150 and 250 billion will be directly linked to subprime not then that 150 billion would come from the price drop products. The management of some institutions is openly challenged and a series of departures within the staff's performance against those sanctioned. Rumors of attempted concealment of losses Merrill Lynch has made amplify the climate of generalized mistrust that prevails on Wall Street. The bank is suspected of having transferred to an investment fund for period of one year in the second quarter of 2007, its impaired loans to conceal its losses and show satisfactory results.

I would say that this is a very informative book and the way he portrayed the financial crisis was very much clear. This book seems to be an information gathering stuff not like pointing fingers on anyone. In this book Zandi has provided a way through which the internet technology can be used to improve the financial crisis. He has made an analysis on how the internet technology can help the mortgagers to improve the mortgage lending. He has also given a clear idea by showing the history that the contribution of the home builders is very much higher towards the crisis, but still the developers of the policy failed to avoid this crisis. Even they have faced so many warning signs but they could not get success in avoiding these crisis. In short Zandi has advised the policy makers in his thesis to make policies against this financial crisis, he has also advised the common citizens on how to deal with such crisis so that they can ...