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Essay / Research Paper Abstract
This 3 page paper looks at the role that financial intermediaries played in the creation of the 2008 credit crunch and considers the impact this had on the flow of capital. The bibliography cites 3 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEcrunchart.rtf
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Unformatted sample text from the term paper:
of the financial intermediaries. An article Kirchhoff and Block (2004) written before the recession clearly identifies some of the issues present that have aggravated the situation in the sub prime
market, leaving much of the blame directly at door of the financial intermediaries in the way that they were behaving.
The term intermediary means someone who is a go between, in financial terms this can mean an individual or an organisation. Banks may act as intermediaries as may different types
of insurance brokers (Howells and Bain, 2007). Some may specialise in the finding of loans sources whilst others may specialise in investments and assurance or insurance products. The benefit
of an intermediary is their ability to bring together the different parties needed for the financial system to operate effectively. The banks are able to attract savers and then use
the money saved to create funds available for borrowing, charging interest, some of which is then passed onto the saver (Howells and Bain, 2007). The loans, such as mortgages
can be made as a result of the aggregating of the pooled investments that are effectively liabilities1 to the bank until they are loaned out. The development of mortgage bonds
also saw the banks package mortgages to allow investors to purchases pools of loans, which the banks would still administer (and gain management fees from will passing on the risk),
created a different form of intermediary. The current problem within the sub prime market is the level of potential defaults which are
taking place due to the way in which sub prime lending has expanded and borrowers took on as they could not afford when interest rates increased, while lenders facilitated a
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