The collapse of subprime loan markets in the United States in 2007 sparked a global financial crisis. With the fallout of subprime loan storm, the global economy has been in serious recession. In addition to the financial stagnation, other industries have been also affected. According to the estimation by International Labor Organization (ILO), the global unemployment population in 2009 will be more than 200 millions. The continued rising of misery index and losing confidence among the public become the motivation for inspiring the researcher to explore this issue.
The research aims to understand the financial storm and explore the cause of the subprime financial storm through the reviews and reorganization of literature. In light of the cyclical and repetitive nature of financial crisis, if we could find the leverage solution to the subprime loan storm, it will be a useful reference for dealing with possible financial crises in future.
This research adopted literature analysis method and history study to collect data and explain the feedback viewpoint of the operation of the subprime loan storm through casual loop diagram (CLD). Through the reorganization of related literature, this research found the historical cause of the subprime loan storm. We also constructed a causal feedback diagram of the formation of subprime loan storm by the archetypes. Furthermore, we found out the leverage solution that might effectively curb subprime loan storm in the causal feedback diagram.
This research presents three conclusions: 1) three reasons for the formation of the structure of subprime loan storm: a. the building-up of Black-Scholes Model; b. the regulations on the capital adequacy rates and commodity derivatives in Basel Agreement; c. the domination of performance; 2) the policy factors for the formation of the structure of subprime loan storm: the over-adjustment of rate policy by Fed; 3) the implicit factors for the formation of the structure of subprime loan storm: the effects of moral decline.
In the last part, the research recommends six fundamental solutions for the subprime loan problem according to the leverage solution to the subprime loan storm: 1) the de-leverage of commodity derivatives; 2) the strict self-management of internal control and audit system in banks; 3) the adjustment of performance-dominated culture; 4) the promotion of moral education; 5) the pace of adjustment of rate policy by Fed should be slowed down; 6) the governments should adopt fiscal policy as much as they can.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0827109-144131 |
| Date | 27 August 2009 |
| Creators | Chen, Yang-ming |
| Contributors | Yi-min Tu, Chia-ping Chen, Showing Young |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0827109-144131 |
| Rights | not_available, Copyright information available at source archive |
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