Taking a Look at the Great Recession

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Many economists have come to consider the 2008 financial crisis as the worst recession since the 1930’s Great Depression. The recession led to the total collapse of financial institutions, the withdrawal of banks by the national governments and the total collapse of stock markets across the world. The housing market also suffered in many areas, which resulted in prolonged unemployment, evictions and foreclosures. The crisis played a key role in the failure of significant businesses, the decline in the wealth of consumers, estimated in trillions of American dollars, a downturn in economic activities and the debt crisis of the European countries. On 9 August 2007, the Banque National de Paris (BNP), a French bank and financial company whose global headquarters are located in London, stopped withdrawals from three hedge funds citing a total evaporation of liquidity. This marked the beginning of the active phase of the crisis. In 2007, the bursting of the housing bubble of the U.S was at its peak. The bursting resulted in plummeting of security values tied to the U.S. real estate pricing. The complex interplay of policies that provided easier lending of loans, overpricing of sub-prime mortgages, on a theoretical basis that the prices would continue to increase, and inadequate capital holdings from insurance companies and banks to back their financial commitments contributed to the bursting of the bubble (Boatright, 2010). During 2008, securities suffered huge losses due to

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