NEW YORK, NY--(Marketwired - May 21, 2013) - Institutional Investor Journals has released an article outlining the five underlying causes of the financial crisis. Author Mark Adelson, Chief Strategy Officer at The BondFactor Company outlines that losses on residential mortgage loans are just too small to account for the full cost of the 2008 financial crisis. He asserts the immediate causes of the financial crisis are high leverage and the strong risk appetite of financial institutions, but believes there are arguably at least five deeper causes dating back decades.
Total losses, including both losses realized to date and those yet to be realized, should fall in the range of $750 billion to $2 trillion. The global magnitude of the crisis is significantly larger, probably in the range of $5 trillion to $15 trillion, depending on the measuring approach. This implies that losses on residential mortgage loans cannot be the main cause of the crisis. They can only be a trigger that unleashed the true causes. The failure (or near failure) of a significant number of major financial firms suggests that high leverage and strong risk appetites were important immediate causes of the crisis.
The Deeper Causes of the Financial Crisis outlines:
1. The five arguable causes to the financial crisis
2. Steps that market participants and regulators can take to prevent laying a foundation for the next financial crisis
3. Why society must define the role of the U.S. financial system
4. And so much more...
This article proposes deeper causes that include securities firms' conversion from partnerships to corporations, the 30-year deregulation trend, the quant movement, the spread of risk-taking culture throughout the financial industry, and globalization. Please visit Institutional Investor Journals to download the full article, and to read more published content from Mark Adelson. For more information about Institutional Investor Journals, please contact Erin Scanlon at escanlon@iijournals.com or +1 (212) 224-3255.
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