What caused insolvent banks, what does all this mean?

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Im doing a report on many economic problems, and im kind of leading to the point how, people failed to pay back mortgages. I know there are many things, but i got to keep it simple or else i would go on forever. So please keep it simple.

1. Anyways. So is failure to receive mortgages/loans a good reason why banks became insolvent?

2.And once they become insolvent do they shut down?

3. Does insolvency, lead to people unable to receive loans for businesses and thus increase unemployment?

4. What is the government doing? Or about to do.

Thanks and please add anything else you may want to. But keep it simple. I know this economy thing gets tricky and complex.

1 Comment
  1. Reply
    February 21, 2011 at 9:34 pm

    1. banks are insolvent because their liabilites exceeds their assets. not receiving interest on loans is one part, but mostly because the value of the loans have gone way down.

    2. bankruptcy is one option, but they are others

    3. if all lending vehicles becomes frozen then business would be frozen so they can’t write paychecks out so people won’t work

    4. trying to fix the financial system by getting banks to loan again.

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