Role of Financial Markets and Institutions in 2007-2010 Crisis

This report delves into the financial crisis of 2007-2010, evaluating the roles of financial markets and institutions in both causing and attempting to resolve the crisis. It analyzes multiple articles that explore aspects like the housing bubble, subprime lending, deregulation, and the collapse of the sha...Read More

FINANCIAL MARKETS
AND INSTITUTIONS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
FINANCIAL CRISIS OF 2007-2010..............................................................................................1
Article 1: analysis of financial crisis of 2007-2010.....................................................................1
Article 2: A Bird’s Eye View The Financial Crisis of 2007-2009: causes and remedies...........3
Article 3: The role of Banks in the subprime financial crisis......................................................5
Article 4: The financial crisis of 2007-2009 causes and contributing circumstances.................7
Article 5. Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities
Industry........................................................................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial institutions play vital role for conducting financial transactions such as
investments, loans and deposits. Each and every entity must have to deal with such institutions
which is also on regular basis because it includes everything which is from taking loan to
exchanging currencies. Some major categories of these organisations includes commercial banks,
investment banks, insurance companies, brokerage and investment companies. Thus, this
assessment will evaluate the role of financial markets and institutions in the cause of resolutions
to financial crisis between 2007-2009. In this report, such evaluation will be done with the
support of articles so that proper analysis on role of financial organisations will get developed.
FINANCIAL CRISIS OF 2007-2010
Article 1: analysis of financial crisis of 2007-2010
This is the paper which provides a systematic reviews and analysis of financial crisis in the
year 2007-2010. The main object of this paper is to examine the various aspects of crisis where
analysis will get develop on growth of housing bubble, easy credit conditions, subprime lending,
predatory lending, deregulation and taxation, incorrect risk pricing, collapse of shadow banking
system and systematic risks. Further, this paper also discusses about crisis impact on financial
institutions and financial wealth in U.S, and on the global economy including Iceland, Hungary,
Russia, Spain and Dubai.
Introducing financial crisis:
According to the views of Chang (2011) between the year 2007-2010, there has been a
severe financial downturn which has impacted the economy of whole world. Economists of the
world generally prefer such period as “The Great Recession” and it is still a debatable topic
amongst them. This is the period of major corporation failure where large decline in the value of
asset has been found. There are substantial government interventions across the globe because of
major decline in worldwide economy. Author stated that between the year 2006-2009 has been a
period of peak where global housing bubble collapsed and in accordance with the case- Schiller
Home Price Index, it is being analysed that home price in US have dropped with approx. 40%
which has caused huge damage to financial institutions across the globe. Stock prices all over the
world gets impact and they suffered a large downfall in 2008. This is the era where solvency of
major financial intuitions has also been suffered and liquidity in market of credit dried up.
During this period growth across the world and credit markets tighten up with the decline in
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international trade. Various government banks and international organisations tried to develop
various plans which includes fiscal expansions, monetary expansion and institution bailout.
Role played by financial institutions:
According to Drew (2018) During this period the U.S. Federal reserve and central banks
of the world have taken various steps for expanding supplies of money so that an attempt will get
develop to avoid the risk of deflationary level in which situation like lower wages and higher
unemployment will get obtained across the world. The credit freeze brought a global financial
system in order to brink collapse. However, during the quarter of 2008, central bank has
purchased US$2.5 trillion of government debt and private assets which are of no use from banks.
Thus, this step was considered as the largest action in the history of world where largest liquidity
injection has taken to mitigate financial crisis across the world. Financial Stability Board (FSB)
will have taken the leading role for coordinating government regarding development of new
global standards so that effective regulation and supervision will get develop to mitigate such
crisis across the world.
Such standards will then have adopted at national level where IMF has taken the
responsibility to monitor implementation of such standards. The U.S. Federal reserve institution
conducted almost $1.2 trillion emergency commitments in order to stabilise the financial sector.
Such interventions include the safety net for commercial banks, investment banks and for
brokerage loans and for purchasing security assets as well. Such lending by international
financial institutions will result in national fiscal stimulus efforts which target those countries
who are in need. All the financial institutions like International monetary fund (IMF), the world
bank, inter-American development bank (IDB), Andean Development Corporation (CAF) and
Latin Reserve Fund all have increases lending to region which is only for short term basis with
the goal of providing credit to private sector, bank recapitalisation. This is the strategy which has
develop to expand economy of countries all over the world.
Another strategy which has taken by the financial institutions for mitigating financial
crisis is to provide low interest rate and to made credit more accessible. This is the strategy
which enables the consumers for increasing their borrowings. In this situation financial
institutions invested in the mortgage market where loans related to mortgage and servicing are
bought and sold between the investors and originators. This is the market which is extremely
large and liquid. Thus, in this way financial institutions will able to manage the flow of money in
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economy. In order to make credit more accessible which allow more specialized risk distribution
some financial innovators like ARM (adjustable-rate mortgage), CDO (collateralised debt
obligation), CDS (credit default swap), CMO (collateralised mortgage obligations) MBS
(mortgage-backed security) was designed strictly so that a way will get developed for bypassing
a regulation. According to the words of Martine Wold who wrote in June 2009, it is been
analysed that the most important part which played by banks during the time of financial crisis is
off-balance-sheet vehicles, the derivatives and the shadow banking system itself. This was the
best development in order to find the way around the resolution. During the year 2008, president
and CEO of NY Federal Reserve Bank placed a blame to banking systems for freezing the credit
market. It is because entities like investment banks and hedge funds became increasingly
important as source of credit and which also able to perform great source of expanding economy.
These are the types of banks which generally plays a vulnerable because they borrow short-term
in liquid market so that they able to purchase long term, liquid and risk assets. It indicates that
disruption in credit market gets occurred through this process of banks.
Article 2: A Bird’s Eye View The Financial Crisis of 2007-2009: causes and remedies
The aim of this paper is to analyse causes and remedies of financial crisis between the year
2007-2009. The object of this paper is evaluate the role of financial institutions which has been
played for improving the condition of economy during such period.
However, in the views of Acharya and et.al., (2009) it is stated that financial institutions
played unique role in economy where they act as an intermediary between the parties that need to
borrow and parties who are willing lend or invest will play their role in market so that
improvement in economy get occurred. During such time, without these institutions it will be
difficult for companies today to conduct a successful business over the worldwide. Thus, it is
being analyse that such financial institutions have faced the risk called systemic because it
generally freezes the capital of market because of which substantial downfall get occurred in the
supply of capital in real economy. According to the author, financial crisis triggered during the
first quarter of 2006 where the prices of housing market gets turned. Thus, the fundamental cause
of financial crisis was analysed that it was a combination of credit boom and housing bubble.
During such year, these two are at their all-time extremes because of which capital in the
economy gets freeze and this starts the time called The Great Recession period.
Initiatives which taken by banks and financial institutions:
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According to the views of Greatrex and Rengifo (2015) During such period, in order to
mitigate crisis across the world, financial institutions and banks have taken the responsibility to
take on excessive assets. Through this process one bank is accepting market mechanisms for
price related risks correctly in order to ensure efficient level of risk related economy. However,
in order to take the initiatives two sources will get identified where on is novel and the other one
is traditional because of which some efficient outcomes gets generated. In the form of novel,
financial institution becomes large and complex in order to adopt activities. This is the main
reason because of which external governance gets weakened because which factors like accurate
prices, market for corporate control and boards is at financial risks. Thus, large financial
institutions was mainly prevented by the banks of bailout through national governments but other
than this stock market still dropping worldwide. Financial enterprises tried to provide easy
availability of credit to customers of US where they are mainly funded by the large inflows of
foreign funds. This helps in facilitating the debt-financing of consumer spending. Here, large
banks tried to provide more loans to home owners which are potential so that a start will get
developed on taking loan for housing prices. In order to improve the flow of money under real
estate bubble, Lax lending standards and rising entities of real estate also provided their
contribution. Strategies gets developed for providing various types of loans such as mortgage,
credit card and auto which are mainly considered as easy to obtain which attract spendings of the
consumers.
Other than this Foote and Willen (2016) stated that strategies get developed for deriving
values from mortgage payments and housing prices which includes mortgage-backed securities
(MBS) and collateralized debt-obligations. This financial innovation helps institution and
investors of the world to take their economic decision for investing in US market so that flow of
money will get generated. Here, the term financial innovation refers to ongoing development of
products which are related to such transactions which designed in such a way that it will offset
any type of particular risks in economy of market. Between the year 2007-2009, it is found that
almost 306 publicly-listed financial firms which is from the 31 countries come together in order
to solve and gather unique data through which strategies will get develop for mitigating the crisis
in economy. One of the main strategy which also has played a significant role in that period is
corporate governance. It is true that shareholders in company will only get attracted if company
has effective potential return, therefore, financial institutions forced businesses across the world
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to contribute their role for the development of society by which shareholder will get attracted.
This is considering as one of the most effective strategy through which flow of money in market
has started to flow in economy. The evaluation of this strategy is analysed as investors are the
one which mainly able provide pressure to organisations which introduces firms to operate for
achieving short term profitability. This will result in motivating managers to increase their
investment in risky assets such as in subprime mortgages, this leads to result in facing huge
losses. in this context author said that during such period risk taking may be optimal for
shareholders called banks because through put options shareholders will able grant a loan from
bank which is in form of governmental deposit insurance.
These are the way through which financial enterprises played a role where their main
perspective is to get the contribution of businesses around the world through which flow of
money started to takes place in world economy and consumer will able to increase their
spending’s. here, to attract the shareholders, such institutions provide shareholder put option
where to invest in capital of company they will take loan from bank which in the form of
governmental insurance deposit so that such amount of money will not get affected and money
also gets secured.
Article 3: The role of Banks in the subprime financial crisis
The aim of this paper is to articulate the role of banks during the period of Great recession
between the year 2007-2009. The focus of this paper is on bank especially what role they played
during the time of sparking the crisis, actions which they have taken in order to reduce leverage
and about how security markets penalized bank equity.
According to the views of Fratiann and Marchionne (2009) most severe financial crisis
which has faced by whole world economy is in the period of 2007-2009. This difference in the
economy of US has arises because of evaluation of home prices. In order to analyse the price,
home prices are generally analysed through annual percentage change of S&P. During this time,
bank needs to explain that they were meeting the objectives of act called subprime mortgages to
people which has low or moderate income. In this process, prudence and credit evaluations
mainly replaced with more flexible procedures so that justified process gets developed for
targeted audiences. Further, in order to expand the market of housing which, two government-
sponsored agencies taken initiation of this mission where main aim of entity is on the
accumulation regarding portfolios of mortgage so that profits will get generated and such money
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will later investment in the economy for generating money flow. Hence, in order to develop
boom over the property prices, government supporters try to exclude taxes, interest rates and
repayment penalties so that consumers of the market will increase their spending and will invest
in economy.
Balachandran and Williams (2018) stated that actual and projected banks tried to write
down the low quality mortgages up to 25% so that proper estimation will get analyse on prime
losses, commercial real estate and on loans which related to consumers and corporations. Here,
the bank has played vital role which is also through the structured financing where main purpose
is to transfer credit risk from individual financial institution to market as whole. This is the
process which is termed as “originate and distribute”. This is the type of model under which
bank originate the loans and purchased it from specialised brokers. Further, bank either sell them
in financial market or transfer them to term called sponsored structured investment vehicles. This
innovation by financial institution result in having gained transparency of transaction which has
been judged correctly by banks because of which demand for it is considered as higher return on
capital.
Author also stated that credit bust typically gets occurred which is because of rusk for
liquidity and for sharp-re pricing of credit spreads. It means that during the year 2007, liquidity
crisis blasted market of interbank. It is noted that on august 2007, rate of interbank in euro zone
increases with 4.6% which is also against a policy rate of 4%. This is the day when European
central bank (ECB) have injected €95 billion of liquidity which means that bank has accepted all
the request regarding funding at policy rate. Thus, with this consideration Federal bank has
usually putted $24billion in the market of US so that proper schedule will get developed for open
market operations. Here, central bank either inoculated additional liquidity or they have issued a
statement under which they have mentioned their willingness to do so. This strategy has proven
good which mainly ended up with historic week in order to develop panic selling of the equity
market. It is also a fact that massive injections which have developed by central banks did not
have provided a long lasting effects which is either on bank reserves or on the monetary base.
According to Berger, Imbierowicz and Rauch (2016) Fair value accounting is an another
way through which IAS tried to generate flow of money on worldwide economy. Here, both
GAAP and IFRS developed with the fair valuation in regarding with financial assets. For entities
which established in the US have securities called debt and equity which mainly classified as
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held-to-maturity, trading or for available for sale. This is the process which either done through
sell off assets or through recapitalizing. In the first phase of crisis in 2007, recapitalization was
firstly perused by the banks, where they have raised $430 billion of fresh capital but this will
only run till august 2008, after than it becomes extremely difficult for banks where they have to
lower the leverage in order to sell the assets in market of liquid. Therefore, fair value accounting
is the aggravates the problems which is through its pro-cyclical bias. This is a condition where
lower accounting asset prices negatively impact on regulatory capital which push bankers to
engage in liquidation sales because of which asset prices will gets decreased. It is investigated
that during the period of financial crisis which is between 2002 to 2008, small banks have the
total assets which is less than $100 million, medium banks generally have total assets which is
between $100 million and $1 billion and large banks generally has more than $1 billion. Thus,
this paper concluded that strategies of bank regarding unloading risk off balance sheet generally
fired back. It gets happen when investors became aware about complexity which defines various
asset based securities because of which investors reacted with sharp increase in risk aversion.
With such brought back of securities, bank must have had to declares their losses on capital
which is also in accordance with fair value accounting. This paper also articulates that of central
bank would perform better if they provide clear and non-conflicting objectives. Through this
there will be a development of independent executive branch of government through which they
will able to rendered accountable principles.
Article 4: The financial crisis of 2007-2009 causes and contributing circumstances
This articles mainly reflects the views of many task force members who have contributed their
view point regarding the role of financial market and causes of finance crisis during the period of
2007-2009.
According to the views of Fein (2009) it is analysed that United State have faced worst
financial and economic crisis during the period of 2007-2009 where its stock market gets
collapsed. This paper mainly focuses on the legal system which has governed by financial
institution during the time of financial crisis. Such evolution gets arises when in order to force
competitive and technological innovation, banking organisation have responses in such way
because of which this forces generally give rise to large and interconnect institutions heavily
because of which capital in the whole economy gets freeze. In order to mitigate such crisis in US
and worldwide economy, central bank has responses to challenges of competitive securities firms
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and insurance companies that has mainly threatened to erode customers and source of revenue of
banking industries. This all get started when securities companies and insurance companies
started to provide loan and other securities with the great offers and with great financial products.
Such development urged banks for finding a way in order to cut the old legal restrictions and to
offer product which are of more competitive nature than these two firms. Various excess which
has been provided by financial institutions mainly gets contributed in developing unsustainable
housing bubble because of which whole economy of world gets weakened where consumers are
not spending much on purchasing any products because in increase inflation in the market. Other
defects in the system of banking will get identified when such issues being addressed by
regulators of federal banking. During this quarter, many other situations will gets generated
where organisations need to fundamentally revise their business operations and practises for
meeting expectation of such supervisors.
It is analysed with the views of Thakor (2015) that during the time of financial crisis, role
of banking regulators were highly optimists regarding their ability to manage transformations
from its traditional banking functions to full time services which has the capability to manage
non-traditional market of the economy. However, authors stated that such crisis will get arise
because of the traditional activities which has been played by the banking industries where real
estate lending is the main reason because of which economy has faced that worst time. Another
reason of happening of such financial crisis when banking system has evaluated the markets of
mortgage in order to expand home financing through innovative products.
However, according to views of Chen and et.al., (2016) it is impossible to analyse one
factor because of which financial crisis between 2007-2009 gets arises, it is because of causes of
such factors are so interrelated with the term called housing finance. Through evolution it is been
analysed that replacement of traditional “originate-to-hold” model with the “originate-to-
distribute” model was the main factor which result in worst economy. The new model which has
adopted by the banking industry mainly avoid primary problem which by separating mortgage
origination to mortgage risk and they are offering mortgage products with more flexible
maturities. The new model which was adopted by bank mainly securitize the loan. It means that
bank transfers its loan and other assets off their balance sheet to other vehicles so that securities
will get transferred to investors easily. Between the year 2007-2009, it is found that almost 306
publicly-listed financial firms which is from the 31 countries come together in order to solve and
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gather unique data through which strategies will get develop for mitigating the crisis in economy.
It is analysed from the findings of article that from a complex interaction of government
economic and social policies, evolution of financial markets, opportunistic business practises and
undue leveraging and risk taking, private financial institution are the type of factors which gave
rise to destabilise forces because of which entire management of banking industry gets
mismatched. From the author’s view point, it is analysed that causes of financial crisis are
manifold where not a specific cause singled out. In order to analyse one specific factor because
of which financial crisis occurred is a very complex way. Therefore, such crisis will generally
have considered to get started during the period of 2007 and it has mainly reached at its critical
stage during 2008 and continues till 2009. Different factors have played its different role which
is at each stage of financial crisis. Some market economist has blamed it with the term called
“subprime leading” where there is a low interest rates and government policies which result in
subsidising the market of house. It is also analysed that the supply and demand for such lending
and exotic mortgages remained mainly on the scale of inconsequential and to large financial
system.
Other than this Bischof, Laux and Leuz (2018) also narrated immediate causes and
occurrence of crisis which mainly includes too many loans with flawed credit standards where
banks have made too many mortgages to its borrowers which is generally based false and
unrealistic assumptions regarding repayments and rising of home values. Subprime and
unconventional mortgage is the another way where banks have made too many loans for their
borrowers with the motive of achieving competitive advantages over other insurance and
securities companies. According to a statistical report it is analysed that during the year 2000-
2007 percentage rate of subprime increases with 200% and with the end of such period 80% of
such mortgages gets securitised. Unregulated mortgage originator is the another way under
which entities who involved in such business originate the loan on the basis of free federal
oversight and they mainly developed their business practises which are not permitted under
federally regulated bank landers.
Article 5. Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities
Industry
The aim of this article is to study the frauds among the largest financial institutions. the
article has been prepared with the objective of examining various characteristics and caused of
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the fraud involved in the industries that provides securities for the mortgage during the time of
financial crises.
As per the views of Fligstein and Roehrkasse (2015) All the deregulated financial
institutions expanded their business operations. Through this expansion, these financial
institutions generated huge profit from their business as a result of earning fee based income. AS,
the banks that provides mortgage-backed lied to their shareholders and sold their loans to some
other client, various issuers and underwriters bet against the bank.
Further, due to the vertical integration of the firm, their sensitivity for the security was
increased. This resulted in enhancing their motivation for the fraud for the resource constraints.
In the 2000s, at the time of financial crises, all the mortgage conceivers misleaded all the terms,
requirements and eligibility criteria of the loan. All the loan that were likely to be in default were
sold out by them.
In the contrary of the view of author, the vertical integration may result in reduction in
the monitoring of the due diligence of the value chain. As this activity was performed by various
firms, it resulted in the enhancement of providing security to the mortgage process. Each of them
helped in enhancing the effectiveness in the monitoring system.
In addition, as per the article, the opportunities of the firm were keep increasing until the
the mortgage securitization was flowing vertically among the businesses, cultivators, issuers and
all the underwriters. as, this situation resulted in increasing the complexity in the value chain and
deferring the monitoring of all the interested parties.
According to the article A mortgage-backed security can be defined as a bond which
combines all the mortgage loans and makes their holders to pay a monthly sum as a payment for
their borrowings (The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed
Securities Industry, 2018). All the mortgage conceivers sales their mortgage debts to the issuers
of the security who combined all the mortgages into the MBSs. Further, they sales all the bundles
for the purpose of complains of various laws. in this order the whole mortgage securitization
process flows.
The whole market of mortgage securitization contains sale and purchase of the mortgage
securities. In this market, all the parties to the mortgage contract provides their oppotunitic
behaviour. As per the views of the article, this behaviour turns into the fraud. The fraud can be
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generated through the sharing false information with the parties, not providing the actual gains to
the parties, etc.
further, the fraud in the security was also a cause of the financial crises. In this type of
fraud, the firms, underwriters, issuers etc. Provide wrong informations to the investors. The
investors use those informations and take their decisions accordingly. it results in taking wrong
investment decision by them, due to which they suffer a huge loss and even they lose their
mortgaged property on the name of security. Due to this activity, the underwriters and the issuers
took the gain of the mortgage, and a huge loss were faced by the investors. It was also a major
cause of the financial crises.
There are various theories that can explain the financial fraud through which the financial
crises can be understand easily. As per the structural theory, the for the purpose of analyzing the
financial crises, the characteristics of the firm and their structural theories and their interaction
between each other should be analyzed first. This analysis can enable the firms in detecting all
the white collared activities and frauds in the firm as well.
In addition, as per the article, the when the whole incorporation of exchanging flows
under a single firm, the opportunity of the malfeasance enhances. It results in enhancing the
opportunities of the fraud (Thakor, 2015). Due to the selling of products by particle originators,
underwriters and the issuers, they needed to face some negative incentives as to dealing with the
mortgage having more risks. Further, as a result of this sale, the rate of MBBSs fall down which
resulted in suffering huge loss by them. This loss also lead in happening of the financial crises.
As per the study of article, the vertical integration of the firm enhances the motivation
and opportunities of the fraud in the market, which directly becomes the cause of financial crises.
during the period of 2004 - 2007, the vertical integrated firms increased at large level. It leaded
in the enhancement of committing security fraud, as the chances of origination of the fraudulent
mortgage increased due to this integration.
Moreover, during 2004 -2007, the financial instruments were in the form of constitutive
device. Generally they were used for the purpose of abusing and manipulating the users. With
the help of these instruments, they used powers above as provided by the users. This caused in
making fraud with them and taking off the power of assets from the owners. This fraudulent
activity resulted in a huge market breakdown in terms of the strategic abuse.
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In addition, for the purpose of recognizing the frauds and other causes of the financial
crises, an inquiry committee should be appointed which investigated all the misrepresentations,
misleading, fraudulent papers and contracts of the mortgage agreements. further, they should
also investigate each mortgage-backed translations performed by the banks and other financial
institutions. All the activities of issuers, underwriters and firms that can cause the financial fraud
should also be analyzed by them.
Through the complete analysis of all these elements, the investigators, could become able
to detect each because that resulted in the financial crises during 2004 -2007.
CONCLUSION
From the above report, it can be concluded that there are various debates and arguments gets
developed for analysing one signal cause of financial crisis which has faced by the US and
economy of world during the period of 2007-2009. However, this report articulates the role of
financial markets and financial institutions during the time of this crisis. Due to the selling of
products by particle originators, underwriters and the issuers, they needed to face some negative
incentives as to dealing with the mortgage having more risks. In this paper five articles have
been evaluated and it is analysed with the findings of all authors that in order to achieve
competitive advantages over other securities and insurance companies, banks move its traditional
model to originate to distribute model because of which economic capital of money gets freezes
and outflow and inflow of money gets stopped in the market. However, this is the most debatable
topic up till now and it is summarised that no single cause will get identified for the period
financial crisis in 2007-2009.
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REFERENCES
Books and Journals
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Balachandran, B. and Williams, B., 2018. Effective governance, financial markets, financial
institutions & crises. Pacific-Basin Finance Journal.
Berger, A.N., Imbierowicz, B. and Rauch, C., 2016. The roles of corporate governance in bank
failures during the recent financial crisis. Journal of Money, Credit and Banking. 48(4).
pp.729-770.
Bischof, J., Laux, C. and Leuz, C., 2018. Accounting for Financial Stability: Lessons From the
Financial Crisis and Future Challenges. Available at SSRN 3319542.
Chang, W.W., 2011. Financial crisis of 2007-2010. Available at SSRN 1738486.
Chen, Q and et.al., 2016. Financial crisis, US unconventional monetary policy and international
spillovers. Journal of International Money and Finance. 67. pp.62-81.
Drew, R.B., 2018. Housing and the Financial Crisis.
Fein, M.L., 2009. The Financial Crisis of 2007-2009: Causes and Contributing
Circumstances. Available at SSRN 1647082.
Fligstein, N. and Roehrkasse, A., 2015. The Causes of Fraud in Financial Crises: Evidence from
the Mortgage-Backed Securities Industry (No. 122-15). IRLE working paper.
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Fratianni, M.U. and Marchionne, F., 2009. The role of banks in the subprime financial crisis.
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Online
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Thakor, A.V., 2015. The Financial Crisis of 2007-2009: Why did it happen and what did we
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