The sub‐prime crisis Essay Example | Topics and Well Written Essays - 3500 words

The sub†prime crisis - Essay Example taking their toll on the modern economies however with prudent monetary policy and effective risk management practices, the future episodes of such nature may be avoided. Getting consumer credit through various financial institutions especially banks requires consumers to maintain a certain degree of credit rating in order to qualify for those loans. Unlike large corporate companies, consumers or rather individuals pose a different challenge and dynamics to financial institutions to cater their needs for credit and formal funding requirements of these individuals. It is because of this reason that various banks and financial institutions have developed their internal rating methodologies which they assign to various consumers asking for credit. Banks than through their internal as well external credit scores or ratings decide to whom they should provide the credit. These criteria of credit rating often are designed to be tough since Banks in order to avoid defaults, tighten their criteria to extend the credit to these customers. However, due to increasing needs of those customers, whose credit history or their credit ratings do not fall under the cri teria laid down by the banks, banks try to accommodate them also. Sub-prime lending is the part of that phenomenon. â€Å"Sub-Prime lending typically has been characterized as lending at relatively costly interest rates and fees to credit impaired or otherwise high risk borrowers.†Error: Reference source not found. Subprime loans are among the newly popular mortgage products, such as interest-only loans, for people with strained budgets, including first-time buyers. Homeowners increasingly use them to refinance and consolidate household debts when their credit scores fall in the wake of bankruptcy, high medical bills, or other setbacks.Error: Reference source not found. It is generally believed that the subprime borrowers emerge due to lack of the good credit history on their back and since there number grew

Commonplace Book Assignment Essay Example | Topics and Well Written Essays - 750 words

Commonplace Book Assignment - Essay Example They start businesses to get profits According to Baordman & Sandomir â€Å" profit motive is the universal irresistible force that theoretically not only drives the market but all of us ..† People choose industries where they can charge fees on their services and prices for their goods. To my surprise, no one got rich by working for someone else. These wealthy businesspersons constantly tell how they quit their jobs and established business that turned their fortunes. This means that the profit motive or the wealth maximization goal motivated them to go on their own and they have ripped the benefits of their efforts. They have chosen to spend their time and money in investing to get returns. The providers of capital to any company are called shareholders. For them to provide capital then they have to get returns for taking that risk. The management of these companies has to ensure that they generate profits to keep shareholders happy â€Å"thousands of executives and managers work for shareholders profits†¦Ã¢â‚¬  (Boardman & Sandormir). This profit-making motive ensures that the management has a sense of direction and focus on one goal instead of having a variety of goals. It imposes discipline on top management levels without this it would result in them awarding themselves lavish holidays and salary packages without regard for the investors. Personally, I have thought of the numerous businesses I would establish in a bid to get profits such include investing in the real estate business or a nightclub. Investing a large sum of money for anyone would require returns in future. This is the main motivation for businesses such as restaurants, retail stores, and insurance companies among others. If these organizations were not making profits then they could close down due to lack of funds. Profit motive means owning something for yourself since the income or the profit comes from the business units