You just watched a video in which president Obama announced his plan for financial regulatory reform. According to President Obama, what are the reasons for financial crisis?

Sample Answer: President Obama indicates that there are several reasons for the financial crisis. According to the president, one reason is irresponsible practices by financial institutions. The amount of risk involved in newly created investments was high, and few investors or consumers understood this. These types of investments were made possible due to a lack of regulation within the system.

Answer: True. One of the major reasons that led to the financial crisis of 2007-8 was irresponsible practices by financial institutions such as betting against their clients. Financial institutions repackaged and sold toxic assets some of which were given a good credit rating. Investors did not know what they were getting into and when the credit rating of the securities changed, the system was plunged into chaos