2008 Financial Crisis Summary

In 2008, the American economy broke down. Known as the Global Financial Crisis, this is widely considered to be the worst financial crisis since the 1930’s when the stock market crashed and the Great Depression hit.

The recession of 2008 is also called the ‘Great Recession’, said to have begun in December 2007, and took a turn for the worse in September 2008, and it was a severe economic problem expanded globally. This recession affected the world economy, and is said to have been the worst financial disaster since the Great Depression. The decline in the Dow Jones this time was -53.8%. Since the official start of the recession in December 2007, and through June 2010 there have been about 2.3 million homes foreclosed in the United States. In 2012, the state with the most foreclosures in January alone was California, with 51,584 houses being repossessed. Unemployment during this collapse was 8.5%, and continued to increase to about 10% as of 2010. People’s reaction to this recession was a huge decrease in spending and borrowing from banks, but an increase in saving.

History helped to recognize the parallels between these eras and learn from them. The crisis of 2008 was not nearly as bad as the Great Depression, but like the Depression consumers lost trust in the market and were afraid to invest in the economy. The Housing Crash catastrophe, like the Great Depression contributed to the failure of banking institutions and led to high unemployment rates. Unlike the Great Depression, the crisis of 2008 was supported by more than a dozen economic stimulus packages provided by the federal government to jumpstart the economy. The federal government stepped in to bailout the banking institutions to avoid another Great Depression. It is important to look back on the history of these two national devastations and learn from their mistakes so we can be better prepared for future economic downfalls in the

The Great Recession was an economic behemoth the likes the United States had never seen before since the Great Depression. In fact, the Great Recession of 2007-2009 was an unmitigated disaster for the US and world economy, its effects still lasting to this day. The Great Recession was spurred by an influx in subprime mortgages and loans. Normally, banks lend money to those they know are capable of paying it back with interest; however, in the early 2000s, banks took advantage of the unregulated sector of subprime loans, creating a substantial housing bubble at the cost of considerable profit. Soon millions of low-income and middle-class Americans were buying homes for much more than their normal income could pay for, but with ever increasing

The financial crisis did not happen in a day or two, it was triggered by a variety of events that happened.in years ago. In year 1998, The Glass-Steagall legislation was repealed, it is a legislation that separated investments and commercial banking activities in the financial sector. This act then allowed banks in the US to act in both the commercial and investment fields, which allowed them to participate in highly risky business. This is somehow responsible for the mortgage-backed derivatives, which is a main cause of the

One of the first rules of parenting is do not reward bad behavior. For most parents, it is difficult, as regulating your child is no easy task, but most parents keep the long term objective of raising a well-behaved child in mind and often give the child an incentive to not act with bad behavior again. Most parents, or regulatory bodies, are able to figure this out. After all it is a simple notion, to incentivize good behavior and to punish bad behavior. During the 2008 financial crisis, however, when nearly every major bank on Wall Street did in fact act in bad behavior, the regulatory bodies or “parents” of Wall Street committed a cardinal sin and did not punish the firm’s bad behavior. The government essentially created a moral hazard

In his book, “Diary of a very bad year: Confessions of an anonymous hedge fund manager”, Keith Gessen provides a captivating, entertaining and a shocking account of the 2008 financial crisis. The 2008 financial crisis is described as the deepest dives and the steepest recovery of a catastrophic mortgage crisis. The analysis will incorporate the “Efficient market hypothesis.” In addition, the analysis explains the concept of “financialization of markets.” The confessions of the hedge fund manager debunk the theory of rational markets. In addition, rational reasoning is a trait certainly absent in the financial sector. The absence of logical reasoning in the financial sector is to be blamed for leading the economy down the path of utter chaos and destruction instead of steering towards a more prosperous, less economically fickle future. Lastly, examine the role of the government in bailing out the financial sector.

It is widely believed that the 2008 financial crisis finds its roots in the greed of fat cat Wall Street bankers but, in fact, the crisis finds its origins in a myriad of different inputs. Just like a financial portfolio, the 2008 financial crisis was the work of years of diversified sources. This “perfect storm” so to speak struck Wall Street in the fall of 2008 the Dow Jones

Peter J. Wallison sums up the 1992 action by Congress: “The seeds of the crisis were planted in 1992 when Congress enacted “affordable housing” goals for two giant government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp (Freddie Mac).”7 The government sponsored entities, Fannie Mae and Freddie Mac were reporting insufficient and inaccurate data to the government regarding their purchases of the mortgages, thus feeding the growth of the existing housing bubble.8 Low down payment mortgages inflated housing prices because buyers could afford to buy a larger, more expensive house with the same down payment as the smaller one. This resulted in many home buyers getting

The market is neither Republican or Democrat, yet Republicans and Democrats use policies to manipulate the market. The financial crisis of 2008 happened because of these policies letting banks create too much money, too quickly and use it to push up housing prices and speculate on financial markets (Michel, 2017).

The cost of the 2008 financial crisis to the economy has remained under-examined, probably because of the difficulty in making related assessment. Many sectors are impacted by this financial crisis at different levels. I believe that banking sector may be most influenced. Over the short term, the financial crisis affected the banking sector by causing banks to lose money on mortgage defaults, interbank lending to freeze, and credit to consumers and businesses to dry up. For the longer term, the financial crisis impacted banking sector by spreading new regulatory actions internationally through Basel III and through the Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States (Investopedia).

2008 Economic Crisis, emerged in recent months of 2008 and many countries of the world are adversely affecting economic development. Especially in this crisis compared with 1929 World Economic Crisis in September 2008 has become visible. The market value of real property in the United States losing one and kept it as a result of the increase in personal bankruptcies even though it is believed that triggered the crisis.

A combination of factors in the early 2000 's caused the perfect economic storm to trigger the worst recession the United States had experienced since the Great Depression of the 1930 's. The "housing bubble" and subsequent burst left homeowners owing more on their mortgages than the property was worth and fueled the financial crisis of 2007-2009. Many economists label the housing bubble as the single largest contributing factor to the financial crisis. Caused by low-interest rates, relaxed standards on lending and the misguided belief that prices and the value of homes would continue to rise, the US economy is still recovering from the effects of the housing bubble.

As some may already know, the recession of 2008 was the second worst in U.S. history and really makes you wonder what were the causes of this devastating event and also what was happening before this. According to moneymorning.com the biggest reason for the recession of 2008 was a Housing bubble that eventually led to subprime lending. From 1996 to 2006, home costs nearly doubled. Robert Shiller 's Home index number changed from 87.0 to 160.6. revealing sixty fifth of this growth occurred from 2002 to peak costs in 2006.

However, during the financial crisis of 2008, the dollar dropped below a dollar. This occurred after one of the largest U.S. bankruptcy cases to ever happen. This was the Lehman Brothers who filed for bankruptcy causing a massive issue within the U.S. financial situation. This helped lead into the biggest financial crisis since the great depression. Kimberly Amadeo of The Balance.com explains the crisis stating “the 2008 financial crisis is the worst economic disaster since the Great Depression of 1929. This was despite aggressive efforts by the Federal Reserve and Treasury Department to prevent the U.S. banking system from collapsing” (Amadeo). The economic debauchery led to the fall of housing prices by 31.8% according to Amadeo.