The Success Of The Great Crash

The financial crisis from2007 to 2008 is considered the worst financial crisis since the Great Depression of the 1920s and destroyed the U.S. economy severely. It led the housing prices fell 31.8%, the unemployment rate rose a peak of 10% in the United States. Especially the subprime market, began defaulting on their mortgage. Housing industry had collapsed. This crisis was not an accident, it caused by varies of factors. The unregulated securitization system, the US government deregulation, poor monetary policies, the irresponsibility of 3 rating agencies, the massed shadow banking system and so on. From my view, the unregulated private label mortgages securitization is the main contribute factor which led the global financial crisis in 2008.

The financial crisis of 2007-2009 can be attributed to many reasons: the Community Reinvestment Act, the creations and securitization of subprime mortgage loans, and the buying and selling of these securitized loans by banks. The Community Reinvestment Act was designed to “encourage” depository institutions of lending to all segments of individuals, predominantly those in low to moderate-income levels, preventing “redlining.” As a result of this act, subprime mortgages where created. The subprime mortgages were issued with variable interest rates, permitting borrowers to make payments only towards the interest and not their principal payment. As the rate of

The most commonly known sub-prime finance crisis came into illumination when a sudden rise in home foreclosures in 2006 twirled seemingly out of control in 2007, triggering a nationwide economic crisis that went worldwide within the year. The greatest responsibility is pointed at the lenders who created such problems. It was the lenders who, at the end of the day, lend finances to citizens with poor credit and a high risk of failure to pay. When the Feds inundated the markets with growing capital

So what exactly happened to the subprime mortgage market that caused all of this? It actually goes back to 1998 with the Glass-Steagall legislation, which separated regular banks and investment banks was repealed in 1998. This allowed banks, whose deposits were guaranteed by the FDIC to engage in highly risky business because they were guaranteed their deposits up to $250,000 per depositor. Following the dot-com bust in 2000, the Federal Reserve dropped rates to 1 percent and kept them there for an extended period. This drop in rates caused bank managers to have to go after higher-yielding bonds because they could no longer make decent yields off of municipal bonds or treasury bonds. They, like Wall Street, got creative with lending, and went after high-yield mortgage-backed securities like subprime mortgages which were mostly dominated by non-bank originators but because of the demand, many banks and private sector lenders jumped on board to increase profits.

Unfortunately, the mortgages would take a turn for the worst; thus, resulting in investment funds lost and the inability to repay the loans that they borrowed from the banks (Isidore, 2008). Left with nothing, the banks were forced to declare the loans as unrecoverable, reduce the bank’s reserve, and limit their ability to generate new loans (Isidore, 2008). These actions destroy the economy because both businesses and buyers need loans to pay for investment expenditures and finance consumption (Isidore, 2008). An early problem was “ mortgage-backed security”. According to AP Economics 19 edition, “ Mortgage- backed securities are bonds backed by mortgage payments”(Brue). In order to create mortgage- backed securities, lenders begin by creating mortgage loans (Brue). When they do, the lenders combine hundreds of loans into one and sell them off as bonds; basically selling the right to regain all future payments (Brue). In the end, banks receive an individual payment for the bond. Bond buyers recover the mortgage payments as the gain on the investment (Brue). As first, it seemed like a good decision on the bank’s party because it moved any future default risk on those mortgages to the buyer’s bond (Brue). Unfortunately, they fail to realize that they had lent the significant amount of money they got from investment funds to selling bonds (Brue). Moreover, the banks bought huge amounts of

In the Western Roman Empire politics was the first contributing factor the fall of it. One of the many reasons is because of their unfit emperors. They had many. The ones who were unfit, were greedy and used cruelty to control and keep control of their empire. Not all showed the ability to be the emperor, some of them inherited the throne, and some of the people who did had a mentally unstable personality. Some Emperors were assassinated by their Praetorian Guard for position or money. Once the Praetorian Guard assassinates the emperor, if they had a leader their leader would become the emperor. As a result of the unfit emperors civil wars broke out across Rome. Legions fought one another. The citizens of the

After the optimistic forecast from the realstate that the houses value were going to increase, many institutions started to make adjustments to take profit from this trend. In some cases, prime mortgages were allowed for subprime borrowers to take. This might look like a great idea to financial institutions because the house values were rising: if a people (who in the first place couldn’t afford a house) stop paying their mortgages then the bank could sell the house for a value greater than the one at the moment of default. Everything was going well, so how is it that the crisis unfolded? Well, these institutions wanted to make more profit

The system had been rigged, it was clear, but even with attempts to keep the values of subprime mortgage bonds artificially high, values collapsed. The government allowed the Brothers to go bankrupt, which triggered more panic in the markets. Commercial lending froze, paralyzing businesses in American and across the globe. Many Americans lost their jobs, savings and retirement

On September 11th, 2001, this nation underwent a traumatic event. Four planes, three buildings, and one field in Pennsylvania. These were the factors that went into changing America into what it is today. The terrorist attacks on the United States led to war, laws, conspiracies, and memorials. None of these however, can replace the lives that were lost that fateful day in September.

The stock market is a big part of the world economy. It reflects the way businesses are doing and it affects almost every American household. When the market is up people are happy, when the market is down people are sad. In nineteen ninety-nine when the stock market crashed the great depression was set in motion. When something like that happens it causes people to wonder, what happened and how do we prevent it from happening again. In the year two thousand there was a book written about the crash by Kristen Brennan, she talks about how to prevent another crash and about what caused the first one to take place. The ironic thing is that this book was written eight years before the next big stock market crash. This makes people wonder, are the causes related, if they are how did we not see this coming, and what was the cause of the two thousand and eight crash. There are many similarities and differences between the crash of nineteen twenty -nine and the crash of two thousand and eight.

The Great Depression built itself out of a time when farm systems failed, people in factories were losing money and jobs, the stock market crashed, and no one had much confidence that anything good was going to happen ever again. Some thought it was going to be over quickly. Shortly after the big crash in October 1929, Andrew W. Mellon, the Secretary of the Treasury said, " The government 's business is in sound condition". The truth was that no one 's business was in good condition and would not get better for quite a long time.

Throughout history art has served as a preservation and representation of the time in which they were made. During the Ancient Greek period art was not only mare naturalistic and humanistic but also became directly affected by the events going around. Both the Marble Statue of an Old Woman and the Marble Statue of Aphrodite are sculptures that were made during the Ancient Greek era, they each tell a story of what was going on during that point in time.

There is no doubt that subprime lending was a major cause of the Recession. It was a tactic used by investment banks in order to get more money from unsuspecting homeowners. However, lenders found out that most of the people who were qualified to have a mortgage already had one. In turn, the lenders had to lower their credit criteria for people to take out a loan on a house. This is how the term subprime lending came to be in the financial world. As a result of subprime lending, the investors were able to make millions off of these mortgages. People who qualified for a subprime mortgage usually had a credit score below that of 620. To make the subprime mortgage deal more customer friendly, the lending banks decided to have the people who qualified for these mortgages didn’t have to have a down payment. Normally, the down payment would be as much as 20%, but this made it easier for people to get mortgages without having to worry about how much money they needed at the beginning of their purchase. “ Many American homeowners bought houses they could not afford,

In relation to the increase in house’s price, the rise of financial agreements such as mortgage-backed securities (MBS) and collateralized debt obligations (CDO) encouraged investors to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S, many financial institutions that borrowed and invested in subprime mortgage reported losses. In addition, the fall of housing price resulted in default and foreclosure and that began to exhaust consumer’s wealth and

The housing market began its collapse on itself with its peak in 2004, and suddenly there was a rapid decrease in the amount of people willing to purchase a home. During the end of 2005 the housing market began to decline, and in 2006 real estate properties dropped by nearly 40 percent to the year prior. At this point the federal funds rate had risen to 5.25%, resulting in many subprime borrowers having the inability to pay off their loans. This resulted in more people defaulting on mortgages investment banks had purchased. When a borrower defaults on their loan, the investment bank is left with the property to sell instead of the monthly mortgage payments. As the housing market declined, these properties