The Financial Crisis Of 2007-08

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The financial crisis of 2007–08, also known as the Global Financial Crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. Mr. Ben Bernanke, Chairman of the Federal Reserve at the time, believed it was equally problematic in many ways; although unemployment only reached half the level due to the Fed’s actions combined with a $700B stimulus. It collapsed large financial institutions, and stock markets dropped to half their pre-crisis level. The surface cause was the bursting of the U.S. housing bubble, which had peaked in 2004, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. Several factors lead to the 2008 financial crisis. First, the 1999 repeal of the Glass-Steagall Act effectively removed the separation between investment banks and depository banks in the United States. Second, credit rating agencies failed to accurately price the risk involved with mortgage-related financial products. Third, the Government, concerned with not performing economically as well as the Clinton administration believed increasing home ownership was the answer and reduced regulatory obstacles (like loan income/debt documentation). Forth, the world 's insurance companies began insuring bundled mortgage instruments. Fifth, there was excessive investment leverage, especially in the Banks and venture capital communities. Sixth, the Government did not adjust
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