FINC 310 - Finance Project - Colorado Tech - 530 - 16095

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FINC 310 - Finance Project - Colorado Tech - 530

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May. 30, 2011

Over the past 10 years, major changes in regulations, technology and economy has affected financial institutions in various ways. In the USA, regulations were tightened following Sarbanes Oxley in 2002 which affected the financial institutions. Financial reporting was made very important and corporations were held responsible for their financial practices and financial institutions had to manage risks with broader perspectives. Furthermore, with the implementation of Markets in Financial Instruments Directive (MiFID) in 2007, affected the financial institutions and corporations in many ways. Not only this, with the collapse of Lehman Brothers in 2008, situation further worsened and global financial system were badly affected and overall crisis started over. Economy of the USA was already showing a decline since 2007, but situation was not improving, people took loans and were not able to pay them back, this worsened the situation as banks had large pressure of unpaid debts and many of them turned bankrupt. Furthermore, this was not the only reason behind the financial crisis; economy of USA was also affected by the other economies which were facing recession. Due to risk of investing in their own countries, people started investing in the USA’s real estate, with these funds real estate sector witnessed a boom which increased the prices of houses. With low interest rates, banks backed people by lending and providing people with loans to purchases houses. Among  These people, there were few of them who did not had good credit history, still banks supported them. Things were going good, but after certain period of time, house prices began to fall and foreigners who had invested in US witnessed losses. The situation worsened to such an extent that the price of houses fell below than the amoun