Wachovia Research Paper Example | Topics and Well Written Essays - 2500 words

Wachovia - Research Paper Example All the major cause will be expansively presented in this paper. The valuable lessons learnt from the crisis will also be thrown light upon in this paper. Wachovia, Bear Stearns, AIG, Lehmann Brothers, Northern Rock, Goldman Sachs are some elite names that suffered the most because of the economic crisis also known as recession. Wachovia was once the fourth largest bank in America but it could not sustain the wrath of recession and was taken over by Wells Fargo in the year 2008. Lehmann brothers filed for bankruptcy while AIG and a few other elites just hung in there with the skin of their teeth. This economic crisis is still having repercussions on countries like Greece and Spain; the whole of Euro Zone is facing a financial turmoil. There are a few other countries that have been not so severely affected by the same. The crisis triggered off because of unchecked debt, banks kept issuing loans to people who invested heavily in buying assets, several things were taken for granted but when proved otherwise there was hardly a place in the world to hide. Overvaluation in real estate is perhaps the biggest cause of the current economic crisis, it is better known as the subprime crisis in the US. The likes of Lehmann Brothers and other financial services went bust because they kept issuing credit to the people who thought the property price would increase and they would be easily able to pay off the debt that they are borrowing. It did not turn out that way and there was a short of equity, this is exactly why the financial institutions went bankrupt. The overvaluation is the biggest factor that caused the current economic crisis. Factors like bad income tax practices have added insult to injury, bad mortgage lending also contributed heavily to this current economic crisis. â€Å"The way to address the root cause is to let house prices drop to where an average house is within the means of an average household.   (Or, alternatively, boost the income of the average h ousehold to the point that they can afford an average house.   But that's very hard.   Letting houses prices go on falling, although painful for everyone who owns a house or who has lent money to someone who owns a house, is very easy.)† (Root Cause of the Financial Crisis) The UK housing market was also greatly affected because of recession. The impact of the global economic crisis on UK property companies was dire. Previously well performing firms in terms of turnover and profits experienced drastic falls in profits and even losses. Tightened lending conditions and dips in confidence in the UK housing sector translated to inactivity in business and thus reduced turnovers, hindered growth and difficult operations. In the general pattern as the rest of the economy, property firms found it untenable to maintain workforce numbers as lack of activity and the heavy toll of remuneration on available resources. Reduced spending propensities and the lack of credit in the housing sector left most of these companies’ futures hanging in the balance. There is also the question of how the entire properties sector and the property companies have set out to recover from the economic crisis. Concerns also arise in terms of how well the instituted strategies can buffer such firms against an occurrence of another financial downturn in the future. The content analysis reveals that the property companies went through severe impacts on their management dispositions as well as on their employees. The managers were