The Crisis : The Financial Crisis

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The Crisis The 2008 financial crisis, or the “Great Recession,” is regarded as the second worst economic period in the United States’ financial history (Huddleston, Fortune Financial News). The recession witnessed almost all the nation’s biggest and most influential financial institutions turning to the federal government to save them from default after the housing market bubble burst. If the bigger firms were to default, the global economy would be paralyzed, but not all who needed saving could be saved. Unfortunately, some thirty US based corporations did not receive any of the $700 billion bailout issued by the United States government. The most significant financial institution that did not see a cent from any sort of government…show more content…
As a result of the dotcom bubble, interest rates were lowered several occasions during a short span of time. The federal funds rate dropped down to 1.75%, and was then lowered to 1% following 9/11. The rate was held there for about two years (Langdana, 2014, p. 265). These low rates opened the door to borrowers, both responsible and overeager. Aside from declining interest rates, the past two presidential administrations endorsed the idea of homeownership and encouraged the public to fulfill that aspect of the “American Dream.” By encouraging borrowing, many banks leveraged themselves so greatly that they were willing to lend that money and issue mortgage contracts to virtually any individual. These mortgages were marketed as once-in-a-lifetime opportunity, where the mortgage required little or no documentation. The amount of money banks were borrowing from the government promoted the belief that this was essentially “free money” and the public followed blindly. People across the United States were borrowing money and taking out mortgages on houses; however, they had little or even no physical means to pay the banks back. To the individual, taking advantage of these low rates meant one thing to them: finally owning a home in a market where the price of homes will only go up and will never decline. What the individual did not know was the mortgage industry was unregulated and the mortgages they used to

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