The financial crisis of 2007/8 reviewed the worst crisis after many years, one of the main reason for the financial crisis is because of different issues occurred during the period. One of the factors is financial innovation and subprime mortgage markets. The function of financial innovation is creating new financial instruments, technologies, organization, and markets. The outcome of financial innovations is mortgage-backed securities products and collateralized debt obligations (CDOs) implemented during the period of financial crisis. The amount of subprime mortgage in US market was estimated at $ 1.3 trillion and over 7.5 million subprime mortgages is remaining to be paid. Collateralized Debt Obligations (CDOs) did a big effect on the crisis, its special purpose vehicle (SPV) had created securities from those purchased assets and then sell it to investors. Many subprime mortgage bundle together sold and dependent on US federal government support and guarantees. It had led to a moral hazard to happen when one party behave inappropriately after the financial transaction has engaged while another party needs to suffer for the costs of moral hazard. The banking crisis is another main factor that led to the financial crisis. For instance, bank runs occur is when the customers withdraw their deposits as soon as possible because they worry the bank might fail and it could affect the banking activity. Besides that, banking crisis includes banking panics and systemic banking crisis, which could lead increasing defaults in a country and all the banks. Numerous of the financial institution and the government gave their assistance during the crisis to avoid the financial system collapse. On September 2008, Lehman Brother filed for bankruptcy, Merrill Lynch had sold to Bank of America at low prices and AIG had faced the liquidity issue. In addition, one of the factors contributed to the financial crisis is agency problems and asymmetric information. Agency problems happened when mortgage originators did not hold the actual mortgage but they sold the notes on the secondary market and they gained the commissions from the amount of the loans produced. During the financial crisis, originators had sold a number of loans to banks and they got information that many of borrowers from these loans about to default. Asymmetric information occurs when the parties engage in a transaction, there do not have the same information in between the different parties and it could exist between investors and companies or investment corporate. Because when investors are evaluating companies, companies may have good or bad information while investors or stock analyst is lack of the information lead the risk exists between investment firms and investors. For instance, the investment firm may advice their customer to buy a company’s stock while they knew the stock’s price is going down. Banks have to estimate the exact of riskiness with intelligence that precise in order to do a rational decision.