Financial markets have experienced some really odd affairs that took place in the year 2007-2008. One such event was the US subprime mortgage market which came under immense pressure of the global money market. This crisis led to a great decline I the demand for asset-backed securities. Credit loss and the assets were also written down with fall in prices and also increased mortgage foreclosures as it was in the year of 2007 and 2008. The profit figure at US banks decreased from $35.2 billion to $5.8 billion and this fall in profitable figure was seen in the fourth quarter of the year 2007 (Claessens, Kose and Valencia, 2001).The main reason for the global financial crisis of 2007-2008 is still a controversial topic and no one has still been able to analyze the same. The major event that formulated as the financial crisis was the subprime mortgage that was massive downgraded occurred as the mortgaged-backed securities by rating agencies. Citibank also announced a seven structured investment vehicles in their balance sheet as an amount of $49 billion. National Bureau of Economic Research had also declared as business cycle peak so that there is a control on the financial events in the money market (Gorton and Metrick, 2012).
The financial crisis and turmoil of the year 2007 and 2008 soon after the Great Depression had rather threaten the existence of the real economy that provides good financial returns. The crisis caused the economic mechanisms to lose out on the mortgage market and also showcased that the economic threads could also work out in a better way to manage the decline in liquidity, defaults, bailouts that could occur in the future money market as well. Most of the investors usually invest in securities that have short maturity such as that of short term money market fund (Chudik and Fratzscher, 2012).