Causes Of 2008 Financial Crisis : Imprudent Mortgage Lending

912 Words4 Pages
Causes of 2008 financial crisis: Imprudent mortgage lending
In this essay, imprudent mortgage lending is considered as a main factor, which caused the 2008 financial crisis. It mainly discusses the cause of imprudent mortgage lending and regular changes. And at last, there are some suggestions proposed for mortgage lending’s future development.
A famous global bank called Lehman Brothers nearly knocked down the international financial system in September 2008. It was an unexpected collapse, which also took huge taxpayers’ money away. It became an enormous disaster for all over the world. Banks always do imprudent mortgage lending with low interest rates and low lending standards. For example, banks gave loans to poor credit histories’ subprime borrowers and struggled to repay them who were doled out loans. In addition to this, banks extended the loan without investigation of lenders’ credits. Banks always did irresponsible loans and evaluations to lenders. It leaded to people were able to buy houses they could not afford. Due to banks’ behaviours, there was a serious irresponsible mortgage lending phenomenon in America. And then mortgage market was always under a high price situation. It had been lasted for a long period, suddenly, when mortgage’s prices started to fall and loans started going bad, there was a serious shock to the financial system. In the big banks, the risky mortgage was transmitted to financial engineers, who turned risky mortgage into possibly low-risk
Open Document