The subprime meltdown Essay Example | Topics and Well Written Essays - 1000 words

The subprime nuclear meltdown - Essay ExampleAutomated systems allowed people to go online, apply for a housing loan and scarcely wait for the cheque to come in. Wall Street greedily provided the money for these loans as investors rushed to collapse up shares in hedge funds that were supposed to give a high level of government issue with a high level of risk. The loans that were given out often required no down payments and could similarly have needed nothing more than interest payments for a year or more in front the principal payments would be added to the bill. Effectively, what was considered a niche product only to be given out after careful scrutiny, became a mainstream product for banks and lending institutes (Browning, 2007).The subprime housing loan market was thus seen as staring(a) territory where banks needed to make inroads before the competition. They expected to get great returns but their investment risks were greatly underestimated. In fact, in some cases the risks appear to have been ignored while the search for short edge profits and sales figures come out as the only important needs of the banks. The situation has taken the American economy to a place where experts are calling it the worst financial crisis since the Great slump (Essen, 2008, Pg. 1).In some ways, the problems in the current crisis can also be due to the very bodily structure and nature of the American market and the American parentage environment. The buyers and sellers on Wall Street seem to do to short term gains and short term results much better than looking at how stable the business practices of a company really are. This makes analysts such as Clendenning (2008) to say that American banks and other lending institutions with a casino mentality while they were taking unnecessary risks. Even if the banks understood the risks involved, the lure of the rewards was simply too great for them to ignore.The crisis itself