Summary 2008 Financial Crisis

hroughout History, our great Nation, the United States of America, went through many era's of financial crises that resulted in depressions. This also happened in 2008, when we experienced an immense financial crisis known as the Great Depression of 2008-2009. In an effort to end the financial crises, the government established three major bailouts: the Emergency Economic Stabilization Act of 2008 (EESA), the Troubled Asset Relief Program (TARP), and the American Recovery and Reinvestment Act (ARRA). Overall, the financial crises of the Great Recession of 2008-2009 caused the government to implement various bail-outs in an attempt to stabilize the economy. These programs have their own advantages and disadvantages that affect individuals and

The 2008 financial crisis can be traced back to two factor, sub-prime mortgages and debt. Traditionally, it was considered difficult to get a mortgage if you had bad credit or did not have a steady form of income. Lenders did not want to take the risk that you might default on the loan. In the 2000s, investors in the U.S. and abroad looking for a low risk, high return investment started putting their money at the U.S. housing market. The thinking behind this was they could get a better return from the interest rates home owners paid on mortgages, than they could by investing in things like treasury bonds, which were paying extremely low interest. The global investors did not want to buy just individual mortgages. Instead, they bought

First, I want to give you a little background on the Financial Crisis of 2008/2009. The Financial Crisis began in December of 2007, and by the fall of 2008 the economy was in a huge downfall. This all began in August of 2007 because of defaults in the subprime mortgage market, which sent a shudder through the financial markets. The former chairman of the Federal Reserve described the crisis of 2008/2009 as a “once-in-a-century credit tsunami”. Many firms, including commercial banks, Wall Street firms, investment banks, all suffered significant losses and eventually went bankrupt. This caused households and smaller businesses to have to pay higher rates on the money that they borrowed. This downfall wasn’t just

The financial crisis that occurred in 2007-2008 is narrowly related to what happened with the housing market and the foreclosure crisis. In 2006, the housing market peaked due to newly available loans such as interest adjustable loans, interest only loans, and zero down loans for people with low-income jobs. Housing prices were increasing radically and new homeowners were taking out mortgages that they would be unable to pay for in the future, all in order to be able to afford homes with such steep real estate value. By 2007, things began to go downhill. Interest rates had begun to rise steeply, mortgage companies had to file bankruptcy, and banks across the country required bailout funds from the U.S. Treasury in an effort to recover

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

Once the US housing market collapsed, it created a credit crisis and crunch in the wider financial markets. Due to the complexity of CDOs many people had no idea how much they were really worth. Many of the CDOS were worthless and it was almost impossible to find the value of them (7). This led to a moral hazard problem whereby there was an overall caution of banks because many had no idea if they were even bankrupt. Inevitably, the interbank lending system crumbled whereby some banks stopped lending to each other and to corporations altogether or only lent with very high interest rates. Many banks who relied on interbank lending for money were heavily affected by this including Northern Rock. Inevitably, depositors of these banks become dubious of their banks financial situation and were provoked into withdrawing their money.

Not since the great depression was there such a devastating economic crisis as the 2008 financial crisis. A crisis rooted from the burst of the housing bubble in the U.S. thus leading to the government being brought down, ruined economies, crumbled financial corporations and impoverish lives of numerous individuals.

The financial crisis of 2007 was the direct result of housing bubble burst, also known as the United states subprime mortgage crisis. The United States subprime mortgage crisis was a, nationwide banking emergency, occurring between 2007-2010, which contributed to the U.S. recession of December 2007 – June 2009. Subprime lending means, “making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc. (investopedia.com).” Up until 2006, It was easy to have good credit because the credit (money) they obtained came from different countries. As a result, people used this credit to get expensive home loans, and this is what created an economic

There are several factors that caused the financial crisis of 2008. The first factor consists of the banking fractional reserve system. With this system, banks only have a fraction of the money they loan out. This makes the bank system extremely vulnerable, because if enough people are trying to take their money out of the bank or if enough people can not pay their loans, the banks can become bankrupt. To make matters worse, the banks were so large that they were even larger than the Gross Domestic Product of the United States. The Gross Domestic Product is the sum of consumption,

On September 15, 2008, the American bank Lehman Brothers, with holdings over 600 billion USD, filed bankruptcy. This was by far the biggest bankruptcy in U.S history and it marked the beginning and the largest financial crisis ever. How can one of the biggest banks in the world fail? How can a bankruptcy in US make someone on the other side of the world unemployed? The answer is Collateralized Debt Obligations (CDOs) and it all started by new innovations in the financial sector combined with deregulations on the financial market.

The Crisis of 2008 has been the worst financial crisis since the devastating era of the Great Depression. The Crisis of 2008 just like the Great depression left millions of people unemployed, and homeless. After the crisis the causes were viewed like speculation, fragility of the system, and greed of the managers which adversely affected the market.

In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists consider it the worst crisis since the Great Depression, and its alarming results are still seen today, a long six years later. Truly, the recession’s daunting size and formidable wake have left no one untouched and can only beg the question: could it have been prevented? The causes are manifold, but can be found substantially rooted in illogical investments and greedy schemes.

The 2008 financial crisis, also known as the U.S. Subprime Mortgage crisis, is considered by many economists to be the most perilous crisis faced by the modern day world economy since the 1930s Great Depression (Krugman, 2009). The collapse of Lehmann brothers, one of the world’s leading investment banks before declaring bankruptcy, in September 2008 almost took down the world’s financial system. Many factors such as U.S. Home ownership policies, consequential securitisation, irresponsible lending by banks, deregulations of banks were pointed out as major contributing factors that precipitated the financial crisis. The 2008 financial crisis eventually resulted in an inevitable global economic meltdown despite aggressive bailout efforts by

Although the start of the financial crisis is thought of by most to be in September 2008, when investment bank Lehman Brothers declared bankruptcy, some of the main contributing factors actually occurred prior to 2008. During the early 2000’s interest rates were low and as a result more people were able to afford

Some financial institutions got bailed out. Some merged with others. Others were nationalized by the USG. But the USG chose not to bail out Lehman Brothers in September, instead allowing the bank to fail. That would become perhaps the biggest failed decision of the entire crisis, because it injected a lack of confidence into the markets. It caused a run on repos, similar to the bank runs traditionally seen in prior financial crises (Gorton and Metrick 279). However, the bank run came in the form of large banks concerned with the failure of other large banks, which had not traditionally occurred. Accordingly, the stock market crashed as the last remaining shreds of confidence exited the markets and a herd mentality ensued globally.