Corporate Financial Accounting

Running head: CORPORATE FINANCIAL ACCOUNTING
Corporate Financial Accounting
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CORPORATE FINANCIAL ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
Instances of Financial Crisis............................................................................................................2
Downfall of the Financial Markets..............................................................................................2
Failure of Lehman Brothers and Balance of Payments...............................................................4
Causes of Financial Crisis...........................................................................................................5
Can Global Financial Crisis occur again?...................................................................................5
Impact of GFC in various economies..........................................................................................6
Recommended Changes...............................................................................................................7
Conclusion.......................................................................................................................................8
Reference List..................................................................................................................................9

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CORPORATE FINANCIAL ACCOUNTING
Introduction
The development of the economic crisis that was observed globally, which gave light to
the issue that Lehman brothers faced in the year 2008 created a severe condition of the economic
and monetary position all over the globe (Lewis-Beck and Stegmaier 2018). The creation of the
global crisis can be regarded to be transition in the central banks as well as in the monetary
regulatory policies. The economy of each and every country in Europe during the year 2008-09
faced a financial scare after the Great Depression in the year 1930. After the World War II, the
current financial crisis that occurred globally is regarded as one of the biggest financial blunders.
It is known financial crisis on a nationwide basis occurs at any point of time but any sort of
financial crisis occurring globally is a rare one ever since the Long Depression in the year 1893
to 1879.
The other issue that took place was the Great Trade Downfall which was a simultaneous
event with the Great Recession and it is during this time that the environment of trade
internationally started falling started falling and continued till the middle of 2009. This event was
a drastic downfall in the last 40 years (Balakrishnan, Watts and Zuo 2016). It is due to this fact
that this paper has been constructed so that an analysis can be made in accordance to the
financial crisis in certain economies all over the globe and thereafter suggestions would be given
with the help of which such events can be averted in the future time period as well.

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CORPORATE FINANCIAL ACCOUNTING
Instances of Financial Crisis
Downfall of the Financial Markets
The crisis that took place due to credit is known to be a direct impact on the failure in the
mortgage market in USA. There were decisions taken in the year 2001 when the decision was
taken by the Federal Reserve Bank was incorporated in order to decrease the interest rate to 1%,
with the help of which the impact that took place on 11th September can be reduced. The decision
that took place to reduce the rate of interest by Federal Reserve Bank led to the incoming of
money from the developing countries that created massive credit availability in the US credit
market (Chen et al. 2016). The banks that undertook investments started to look for better returns
over their investment and the return was more than 1%. This opportunity was caught by the
investors which led to the rise in the market of mortgage in USA.
The citizens of USA were attracted with increased credits available in the market and
therefore started to buy properties for their own by taking mortgage from the lenders. With the
rise in the increased amount of credits the people of USA showed keen interest towards
purchasing properties and therefore the demand for the same increased. This led to the
development in the real estate sector. The mortgage organizations sold the entire borrowings to
the investment banks and the borrowings were sorted on the basis of their risks and thereafter
sold the mortgages to the derivatives with the name of different names and thereafter came back
to the investors globally (Rey 2015). In this manner the risk got transferred to the financial
investors. The process looked a bit everything seemed to be normal since the monthly
instalments were paid properly by the borrowers.