Question by Big BOB J: is a failure to recognise and evaluate risk the main reason for the current global crisis financially?
been discussing with a freind and just looking at what the thoughts on this area are.
to what extent do you believe that a failure to fully embrace and really recognise risk has lead to the current financial crisis in its global scale? what other contributors could be overlooked by us in our debate?
Best answer:
Answer by got it
sounds more to me like your looking for homework help. I’ll help you a little, but i’ll be honest – if you would at least try ie put some thoughts down here that represent what you are thinking, I would expand a great deal more on my answer. In any case, Lets just look at these sub prime loans – one of many problems that contributed to the current financial crisis. These loans were given to people who A. Never should have qualified for them, B. Were rigged to give the lenders time to package them – what i mean by that is teaser low rates to start with ie 3%, then they balloon to 9% or more in 2-3 years – buying the purchaser time to package them into complex financial Instruments. The purchasers of these notes, were in fact greedy and did not do their diligence. They assumed, incorrectly, that the US housing market would continue to rise, and that their worst case was getting a house back. They thought, no problem, we will just sell it for more and make even greater return. Greedy people, poor credit worthy borrower, greedy banks = crisis. ; Now, if you want to add here, i’m happy to give other examples.
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