Summary: The 2008 Financial Crisis

In 2008 America’s financial system was brought to a stand still as decades of negligence and financial decisions caused our economy to sink into the worst recession since the great depression. Cultivating a problem worse than America has seen in roughly a century points one finger not at a particular cause, but a string of events that finally gave way. Now, eight years later our economy is still recovering, and time has allowed us to look back at decades of mistakes to try and connect the dots of the perfect storm that collapsed our financial market in 2008. In 2009 Brookings Institution, one of Washington’s oldest think tanks, concluded there were three causes that resulted in the crisis. Economists Martin Baily and Douglas Elliot stated that the results of government intervention in the housing market, the influences Wall Street had on Washington, and global economic forces were the three main causes of the economic collapse. They believed that a housing bubble inflated when Fannie Mae and Freddie Mac, two government-sponsored enterprises, intervened in the housing market. The banking industry was called out to be blamed for years of manipulation of our political and financial systems. Lastly, Baily and Elliot cite the global economy and the existence of a credit boom throughout European and Asian nations. Low inflation and consistent growth throughout the world economy spiked investors’ interest in acquiring riskier investments, which encouraged

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

Since I’m not a very creative person when it comes to school projects. I decided for my project that I was going to right a research paper about the 2008 financial crisis which I think was huge turning point that affected our economy to this very day. I put a lot of effort into this research appear since my test grades have been not up to par so I really hope you enjoy!

In his book, “Diary of a very bad year: Confessions of an anonymous hedge fund manager”, Keith Gessen provides a captivating, entertaining and a shocking account of the 2008 financial crisis. The 2008 financial crisis is described as the deepest dives and the steepest recovery of a catastrophic mortgage crisis. The analysis will incorporate the “Efficient market hypothesis.” In addition, the analysis explains the concept of “financialization of markets.” The confessions of the hedge fund manager debunk the theory of rational markets. In addition, rational reasoning is a trait certainly absent in the financial sector. The absence of logical reasoning in the financial sector is to be blamed for leading the economy down the path of utter chaos and destruction instead of steering towards a more prosperous, less economically fickle future. Lastly, examine the role of the government in bailing out the financial sector.

There were several financial crises in our modern world, some say the 2008 is still being felt. After the great depression, depository activities and investment activities were kept separate. Depository activities hold and facilitate the exchange of securities - investments such as bonds which allow investors to own assets without taking possession, meaning they can be easily traded. In 1999, the financial services modernization act eliminated this separation. Therefore financial companies began connecting depository activities with investment activities. For example, Wall Street sold collections of mortgages to investors and made large profits. Lenders had to give out more loans but since they have already given loans to borrowers with good

The main reason for the crisis was a boom and bust in the housing markets at the same time. Home values rose rapidly during the beginning of the 2000’s. Many homeowners used their homes and other assets to withdraw equity to produce add-ons to the house, such as kitchens, decks, or patios. Once the value of the houses went down, they could not pay off this extra debt. Homes were beginning to be valued at less than what the homeowners owed on them. This period was powered by leverage, securitization, and structured finance. Housing was a hot commodity at that time, and Americans were taking out hefty loans in order to pay for them. There was a rise in self-employment at that time, and borrowing money was very relevant at that time. Adjustable rate mortgages, which provided initial interest rates and low monthly payments were the most common form of loans between 2004 and 2008. The banks were not careful in their securitization of loans, and a lot of loans defaulted. The defaults mainly revolved around the failing of the housing market. At the time, there was low requirements for down payments on houses. Lenders were only asking for approximately 3%, today it is up around 10% (Golub). This allowed for more and more people to put a down payment on a house, who would not be capable of paying the banks back. During this time, there was a dramatic increase in sub-prime lending, which means that the people borrowing the money had lowering credit

The 2008 financial meltdown resulted in the most treacherous investment landscape observed since the great depression. The most notorious issue was the subprime mortgage crisis, which had a ripple effect felt through every market in the world. The banks, whose leverage rate should never have been higher than two times capitalization, surged as high as thirty to forty times market cap. With this level of exposure, any unforeseen market fluctuations could mean disaster. Lehman Brothers, the oldest investment bank on Wall Street, went bankrupt and thousands lost their jobs. Outside of finance, thousands of companies in the United States and abroad had to fire significant portions of their workforce, thus furthering the economic decline and plunging the US into an economic recession. In the late 1990s, Congress repealed the legislation separating commercial and investment banks, which resulted in investment banks overreaching their bounds. The Emergency Economic Stabilization Act of 2008 was enacted due to the effects of the subprime mortgage crisis, which allowed the US Treasury to spend billions of dollars to bail out the investment banks by purchasing distressed assets. However, the bailout plan has created a debate over whether it was a good idea for the government to bailout the investment banks. Also, if the government fared better or worse in the years following the bailout.

The 2007 global financial crisis, which was regarded as the most serious financial crisis since the Great Depression, still influences the global economy today, especially the U.S. economy. This paper mainly concentrates on the effect of fiscal policy during the recession by analyzing the size of the Keynesian multiplier. In particular, the core question is to measure the effect of the fiscal stimulus plan that amounted in an additional $20 billion in spending per quarter (measured in 2005 dollars) starting from the first quarter of 2008 to the last quarter of 2009. This paper will identify the origin of the financial crisis of 2007, explain why conventional expansionary monetary policy is ineffective in this case, argue for the

The market is neither Republican or Democrat, yet Republicans and Democrats use policies to manipulate the market. The financial crisis of 2008 happened because of these policies letting banks create too much money, too quickly and use it to push up housing prices and speculate on financial markets (Michel, 2017).

The new lackadaisical lending requirements and low interest rates drove housing prices higher, which only made the mortgage backed securities and CDOs seem like an even better investment. Now consider the housing market which had become a housing bubble, which had now burst, and now people could not pay for their incredibly expensive houses or keep up with their ballooning mortgage payments. Borrowers started defaulting, which put more houses back on the market for sale. But there were not any buyers. Supply was up, demand was down, and home prices started collapsing. As prices fell, some borrowers suddenly had a mortgage for way more than their home was currently worth and some stopped paying. That led to more defaults, pushing prices down further. As this was happening, the big financial institutions stopped buying sub-prime mortgages and sub-prime lenders were getting stuck with bad loans. By 2007, some big lenders had declared bankruptcy. The problems spread to the big investors, who had poured money into the mortgage backed securities and CDOs. They started losing money on their investments. All these of these financial instruments resulted in an incredibly complicated web of assets, liabilities, and risks. So that when things went bad, they went bad for the entire financial system. Some major financial players declared bankruptcy and others were forced into mergers, or needed

were reaping the rewards while taxpayers were inheriting the risk. In 1993 Congress met the opposition half way by slowly incorporating direct federal loans but still keeping guarantees in place for the banks. After the financial crisis of 2008, President Obama completely eliminated the middleman and fully implemented direct student loans (Kingkade). Although this stopped large banks from profiting off of government backed loans, it still didn’t reduce the supply of loans or the ease of obtaining them.

Our society seems to doing well since the financial crisis of 2008. The country is recovering from the Great Recession, unemployment is down and the global domestic product is up. People have jobs and are paying taxes. President Obama lowered our budget deficit and promised to make healthcare more available to all. On average, America is well on its way to recovery. But what about the people that slipped through the cracks of the financial stimulus plan? These are the people that lost their jobs, and subsequently their homes. These are America’s impoverished and homeless.

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

Inside Job is a documentary that covers the 2008 financial crisis. The first part of the documentary focuses on what led to the financial meltdown. In the 1980 's the finance industry exploded after investment banks went public, leading these firms to have an excess of stockholder 's money. Then the president at the time, Ronald Reagan, began a 30 year period of financial deregulation. Reagan deregulated savings and loan companies which allowed them to make risky investments with depositor 's money, which led to taxpayers paying $124 billion dollars when they inevitably failed. Executives in these companies were also stealing money from their depositors. Another problem was that many of the executives from these investment banks ended up being put into powerful positions in the government where they pushed for even more deregulation. In the late 90 's the internet bubble burst after investment banks knowingly promoted internet companies they knew would fail. A financial innovation known as derivatives became a $50 trillion business yet they were completely unregulated. When there was an attempt to regulate this market, it was almost immediately shut down and a law was put in place banning all regulation of derivatives. Under these new rules it created a new securitization food chain. Investment banks were creating complex derivatives called collateralized debt obligation and selling these debts to investors. Then these CDO 's were rated by rating agencies, with most of them

The cause of the 2008 financial meltdown was caused by many different things that created the “perfect storm”. Some of these factors include Wall Street greed, individual greed, Barney Frank and home-ownership “promoters”, mortgage brokers, subprime loans, Alan Greenspan and The Fed, credit default swaps, greedy investors, speculators, unethical or incompetent rating agencies, Republicans, Democrats, Congress, and Presidents (Terry 2013). There were numerous things that caused the meltdown and we may not even know all the factors. What we do know is that it happened and it happened fast.