Credit crunch- Case of Northern Rock requiring official assistance /intervention

Type :

Term papers

Pages :

5 pages

Format :

.doc

Published date :

05/11/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
Credit crunch- A historical overview
Role of regulatory authorities
The run on Northern Rock
Conclusion
Bibliography

Abstract

What is happening in the developed world today is one of the worst economic meltdowns of modern history. The financial institutions are trembling like nothing else whereas the impacts of such a failure of financial institutions are clearly felt by the rest of the world as well. The reductions in consumer spending, the increasing level of unemployment as well as forecasts of negative growth are some of the aftereffects of this economic downturn.

In the wake of these crises, there are many important concerns which are being expressed as the potential effects of the credit crunch can easily be felt against other economic variables too. (Campbell, 2008).Apparently, the current crisis may be attributed to the subprime lending made by the different financial institutions. However, at the core of it is a whole plethora of different variables which are not only correlated with each other but also created a combined effect on different macroeconomic variables too. The failure of financial institutions to regularly check in their appetite for taking more risk not only resulted into the current credit crunch but also indicated the degree of the regulatory control over such institutions to discipline their behavior.
northern rock is such a financial institution in UK which required intervention from the government because of its apparent failure to sustain the losses incurred due to subprime mortgage episode.

In this research study, the current credit crunch will be discussed with special focus on northern rock as a firm requiring official intervention.