The Financial Crisis Discussion

The financial crisis discussion referred to the discussion of the period when the government agencies had numerous challenges in their attempt to resolve the crisis. There was a lack of legal power for the implementation of the measures that could stabilize the financial situation; the Congress was reluctant towards the granting of the authority. Additionally there was the desire to act swiftly in the situation that was characterized by the market panic. The officials from the Treasury realized the dangers as a result of the increasing foreclosures and made efforts towards the facilitation of limited modification of mortgages. Additionally any progress was impossible since it would have led to the public funds being directed towards some irresponsible borrowers (Caballero, Ricardo, and Kurlat, 2009). The integration of the financial markets has led to the increase in the contagion effect of the financial crisis. The tracking of the effects of the transmission has curtailed by the fact that the crisis develops in different stages. Additionally the countries affected by the crisis possess varied structures in terms of their productive capacities as well as diverse socio-economic troubles and potential to respond fast to the global shocks.

Fair value is the estimation of the values of all the assets as well as liabilities of a company that has been acquired and utilized for the consolidation of the financial statements for the two companies. In the context of the future markets, fair value is normally the equilibrium price about a future contract. It is normally equivalent to the spot price after the consideration of the compounded interest over a particular duration of time. It is the amount of for which an asset exchanged between the wiring as well as knowledgeable parties in a transaction that can classify as being at arm’s length (Damodaran Aswath, 2009).  Under this approach, the liabilities, as well as assets, are normally re-measured a periodic basis to be able to reflect the variations in their value. Additionally it should reflect the consequent variation that affects either the net income or in the other case the comprehensive income within that duration. The outcome is normally a balance sheet that is reflecting the current value liabilities as well as assets. The cost is normally of greater volatility in the duration reported performance as a result of the variations in the fair value.

The idea of fair value in accounting is spontaneous on the occasion utilized to the quoted investments for instance bonds, equities that are on the balance sheet of the market value. It mainly applies to the financial assets as well as liabilities since the market prices will be existing in such elements. Opponents of fair value argue that the values can be irrelevant for items that are normally held for extended durations since the investors fail to be interested in the interim value deviations. Additionally the values could be irrelevant as well a misleading as a result of some reasons such the items being held for an extended duration (Hoshi and Kashyap, 2008). The other argument for the opposition is that the fair values distorted via inefficiencies of the market, investors being irrational as well as the unreliability of the estimated values derived from the models. The foreclosure avoidance strategy was adopted by the Obama administration and took the perspective of an interest rate subsidy. The decision-making impediments related to the disorganization of the Treasury making it hard for the harnessing of the administration energies in one direction (Citigroup Global Markets Inc, 2011).

References

Caballero, Ricardo J., and Pablo Kurlat. 2009. “Public-Private Partnerships for Liquidity Provision.” Massachusetts Institute of Technology (March 4)

Citigroup Global Markets Inc,( 2011). The Fundamentals: Equity Valuation, 17 March 2011

Damodaran Aswath, Volatility Rules (2009). Valuing Emerging Market Companies, September, Stern School of Business

Hoshi, Takeo, and Anil Kashyap. 2008. “Will the U.S. Bank Recapitalization Succeed? Lessons from Japan.” Working Paper 14401. Cambridge, Mass.: National Bureau of Economic Research (December).

Carolyn Morgan is the author of this paper. A senior editor at MeldaResearch.Com in paper college 24/7. If you need a similar paper you can place your order from custom nursing papers.