The Financial Crisis Of 2008

1747 WordsMar 8, 20167 Pages
The economic crisis of 2008 was one for the ages, it changed the world of investing forever. That year, the stock market crashed, bank failures and the infamous wall street bailout that can all be traced back to the subprime mortgage crisis.. The 2008 economic crisis rocked the global economy for the worst, and to this day the United States is trying to recover from the impact that the crisis had. In order to understand why exactly the banks failed people have to understand the subprime mortgage crisis. The subprime mortgage was a response to the central banks around the world trying to stimulate the economy. In doing so they created capital liquidity through a reduction in interest rates. in return, investors sought higher returns through riskier investments. Lenders took greater risks too, and approved subprime mortgage loans to borrowers with poor credit. When the word “subprime” is said people need to think crap, because that’s what it is. They were mortgage bonds that were filled with absolute garbage but the financial institutions that rated them gave them a higher rating than they actually deserved. There were two major institutions that rated the mortgage bonds, so when banks came to a particular institution they would somehow give them a indirect bribe usually in the form of donation or something along those lines so then they were obligated to give out a better rating than it really deserved. If one of the institutions were to refuse to give a fraudulent rating

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