A Toxic Solution to the Crisis

The financial crisis is largely a result of toxic assets held by banks. However, bailouts, originally designed to buy these toxic assets, are now trying to eliminate the liquidity crisis —but that’s only a symptom. The real problem is solvency. Finance geeks would tell you that the current financial crisis began when investors lost confidence in the value of securitized mortgages in the US resulting in a liquidity crisis that, in turn, caused a substantial injection of capital into financial markets by the US Federal Reserve.

The financial crisis is largely a result of toxic assets held by banks. However, bailouts, originally designed to buy these toxic assets, are now trying to eliminate the liquidity crisis —but that’s only a symptom. The real problem is solvency.

Finance geeks would tell you that the current financial crisis began when investors lost confidence in the value of securitized mortgages in the US resulting in a liquidity crisis that, in turn, caused a substantial injection of capital into financial markets by the US Federal Reserve.

The financial crisis is largely a result of toxic assets held by banks. However, bailouts, originally designed to buy these toxic assets, are now trying to eliminate the liquidity crisis —but that’s only a symptom. The real problem is solvency.Finance geeks would tell you that the current financial crisis began when investors lost confidence in the value of securitized mortgages in the US resulting in a liquidity crisis that, in turn, caused a substantial injection of capital into financial markets by the US Federal Reserve.

 

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