REASONS OF GLOBAL FINANCIAL CRISIS

Abstract

A large real estate and credit bubble lies on the backbone of the global financial crisis that has rapidly spread to other countries since it emerged in the US. Much of the mortgage lending before the housing bubble was formed was the loans given to people called prime mortgages and those with high repayment power. However, as housing prices began to rise, the rate of loans called subprime mortgages (less than sub-prime mortgage loans) and used to lower-paying people began to increase rapidly. The adverse effects of the global financial crisis that emerged from the financial system in the US and rapidly spread to other economies have been destructive since the last quarter of 2008. The 2008 global financial crisis has led to an increase in home prices in mortgages, which are given in sloppy manner to people with insufficient pay in the low interest environment in the US; followed by problems with the repayment of the housing loans extended by the floating interest rate that the FED increased interest rates. The fact that housing loans are converted into derivative products and that financial institutions invest in these products without the necessary consciousness for risk control has further increased the size of the crisis. In fact, the global crisis is a crisis brought about by mortgagebased derivative products rather than the housing credit itself. In other words, the source of the problem was the swift change of mortgage loans, on which the derivative was built. Many countries have troubled stocks and derivatives in the banking portfolios of the US financial markets, making the crisis more global, with the value of these troubled assets falling. The aim of the study is to examine the main causes of the financial crisis taking into account the opinions of the literature.