Journal Entries

Journal Entry: Critical Thinking
Name:
Institution:
Journal Entry: Critical Thinking
The mortgage crisis in the United States is a central point of concern for the financial institution, the public, and the government. The causes of the crisis are a combination of forces rather than a single problem. Every stakeholder in the mortgage saga has a level of responsibility to bear for the crisis. According to Holt (2009), the human actions and inactions that led to the mortgage crisis include the failure to call into question evolving risks, predatory lending practices by financial institutions, unregulated derivatives and the unreasonable borrowing by the homebuyers. However, the officials who deregulated the financial industry bear the major responsibility for the mortgage crisis in the United States.
The lack of prudent mortgage lending standards allowed the financial institutions to engage in greedy and irresponsible business practices. The deregulation lifted the risk management regulations required by banks and other financial institution (Nicholas, Hendrickson, & Griffith, 2011). Therefore, banks shifted the burden of mortgage risks to investors and brokers, which fueled the mortgage crisis. Brokers sold mortgage loans to unqualified persons because their interest was not in the business success, but the immediate financial gain from the deals. The banks and lending organizations blindly relied on the credit rating agencies to assess risks. Further, the lack of prudential standards allowed everybody to access mortgage loans, thus affecting the sustainability of the mortgage lending business.

Homebuyers relied on the information provided by the brokers and financial institutions to make mortgage decisions without assessing the effectiveness of the plan (Nicholas et al., 2011). Both the home buyers and the lenders played a part in the current mortgage crisis, but their actions were made possible by the deregulation of the financial industry. Therefore, the officials who deregulated the financial industry are responsible for the mortgage crisis in America.
References
Holt, J. (2009). A Summary of The Primary Causes of The Housing Bubble and The Resulting Credit Crisis: A Non-Technical Paper. The Journal Of Business Inquiry, 8 (1), 120-129.
Nicholas, M., Hendrickson, J. & Griffith, K. (2011). Was The Financial Crisis The Results Of Ineffective Policy and Too Much Regulation? An Empirical Investigation. Journal of banking regulation, 12 (3), 236-251.