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Financial Crisis Impact on India

The Trigger point

The financial institutions of the United States of America "The most powerful and influential" country in the world started to show downward trend in 2005 and collapsed in 2008 starting with investment banks such as Bear Sterns and Freddie Mac and Fannie Mac. This sent a ripple through the rest of the globe. Other nations were affected but each one in its own way with respect to domestic circumstances.

Uinted States of America's Financial Crisis

The Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act passed in 1999 by President Bill Clinton relaxed parts of the Glass-Steagall Act that had prohibited a bank from offering a full range of investment, commercial banking, and insurance services since its enactment in 1933.

India At Its Best

English: A chart representing the Senate and House...

United States

This lead to a change in the banking system, allowed commercial and investment banks to consolidate

During the economic boom in the early 1990's to 2001 September there was a very drastic increase in the prices of real estate assets. During this time, there were a huge number of people buying homes. Many of them who took loans from the banks did not have a good repaying loans record (a poor credit history) and also loans that were beyond their financial means. Banks were also encouraged to give loans to persons who have marginal income and to sub- prime borrowers. This led to an unsustainable increase in prices year over year which was far greater than the price of inflation.

Banks felt it was safe to give as much loans as possible to all kinds...