The Financial Reform Act: Will it Succeed in Reversing the Causes of the Subprime Crisis and Prevent Future Crises?

Abstract

More recently, Prof. Blinder of Princeton, and a former vice chairman of the Federal Reserve Board, and Mark Zandi, the chief economist Of Moody's Analytics, and the adviser to Sen. McCain in his presidential campaign, reported that, had there not been governmental intervention, over 16 million jobs would have been lost, as opposed to the 8 million the country has experienced, which would have led to a second Great Depression.

Global Financial Meltdown – Systematic Literature Review A Qualitative Research Study

“…They aggressively financed the mortgage lenders through financial derivatives and PLS (Private Level Securities) underwriting. Murdock (2010) explained the scenario that large investment banks, by financing the Subprime mortgagors, purchasing their mortgages and slicing them through securitizing to construct Collateralized Debt Obligations (CDO), and trying to get superior investment ratings for speculative-grade securities from the rating agencies. The process of securitization started with the inclusion of investment banks.…”

“…Most of the Subprime mortgages were on floating rate with very nominal rates at the initial stage while progressively high rates afterward. Murdock (2010) quoted some of the innovative Subprime mortgage types, for instance:…”

“…They are now living miserably; they are in dejection; they are in mass depression. The scenario of the USA for the ordinary person after subprime crises were elaborated by Bob Herbert of the New York Times (cited in Murdock, 2010) that millions of US citizens are trapped in an economic crisis. During the recession, due to defaults, most of them lost their houses or were at the edge of losing houses.…”