The Cause of the Financial Crisis - 990 Words

Introduction The current financial crisis which spread in 2008 had influenced the global economy in different aspects such as the GDP, labour markets, government policy(Read 2009 ). Considering the causes of the financial crisis, Greenberger, who was the director of the Division of the trading and Marketing of CFTC demonstrated that lack of information transparency was the main cause of the financial crisis. This essay would identify the lack of transparency in the securities markets led to the moral hazard which finally result in the illiquidity and disaster in the financial market. According to the report of The Transparency International ,by transparency, institutions are required to disclose all the information which enable to ensure their accountability to the stakeholders. Transparency is really important in the financial systems since it could help the investors to fight with the fraud and corruption, avoid the information asymmetry and identify the risks accompanied w ith the financial products. Moreover, by transparency, the markets could act more effectively since the products prices and the hidden costs were need to be opened to the public(). Oppositely, if lack of transparency, it is easy to cause the â€Å"moral hazard problems† which means that the financial institutions could transfer the risks related to the repacked financial products to the investors. 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