Research Description and Objectives 2
The American economy is currently in a credit crunch, meaning that credit is very difficult and expensive for consumers to obtain. The key causes of the credit crunch include making loans to consumers who previously would not have qualified (sub-prime loans), falling home prices, and easy access to an excess of credit. A chief consequence of the credit crunch includes investors moving away from mortgage-backed and credit card-backed securities. To avoid a similar situation in the future, creditors need to re-examine and modify their lending practices and consumers need to understand their financial situation better, including the terms of their loans and their actual ability to repay their obligations.
The media has given much attention the credit crunch in the American economy and the challenges facing consumers. News reports detail foreclosures on homes and the difficulties that ordinary Americans are having as their watch home prices and the equity that they have in their homes fall. Other consumers are forced out of their homes even as they struggle to decide whether to file bankruptcy or face cutbacks at their jobs. There is debate about whether the economy is in a recession, and how a recession would affect the credit crunch already facing consumers. This research considers what a credit crunch actually encompasses, the causes of the current credit crunch, the consequence of the credit crunch, and how such a situation might be avoided in the future.
Research Description and Objectives
Research was conducted on the Web and in major magazines and journals in order to establish how "credit crunch" is defined, causes of the current credit crunch in the United States and consequences of the credit crunch. The objective of this research is to provide the reader with the environmental context of the current credit crunch, consequences of the credit crun...