2008 Financial Crisis Marcus YAldo

The 2008 financial crisis was the worst economic disaster since the Great Depression of 1929. It occurred despite efforts by the Federal Reserve and Treasury Department to prevent the U.S. banking system from collapsing.
It led to the Great Recession. That's when housing prices fell 31.8 percent, more than during the Depression. Two years after the recession ended, unemployment was still above 9 percent. That's not including people who had given up looking for work.
"The first signs of the crisis were in June 2007 when the 5th largest investment bank in the US, Bear Stearns, announced large losses in 2 of its hedge funds with exposure to subprime assets. Clients were prevented from withdrawing money and the funds were eventually shut down at a $3 billion dollar loss." (Wall Street Oasis)
How it started

It all started with legislation. The Community Reinvestment Act of 1977 was designed to make it easier for low-income families to get mortgages. But due to a long string of misguided amendments, revisions, and related legislation over the next 25 years, good intentions turned into idiotic orders.

One by one, checks and balances intended to ensure that lenders didn't write bad loans were removed. And by 2002, the Department of Housing and Urban Development (HUD) required pseudo-government agency Fannie Mae to dedicate 50% of its funds to back affordable housing. Which was hundreds of billions of dollars to back bad loans.
Bankers found a creative way of getting all those risky loans off their balance sheets by packaging and selling them to investors and institutions all over the world. But they couldn't have done it without help. Rating agencies like Standard & Poor's and Moody's essentially told the banks how to structure mortgage-backed securities in such a way that the agencies could rate them as investment-grade when they weren't.
This is basically what turned the American subprime mortgage crisis into a worldwide financial meltdown. Mark Gilbert calls it, "a conspiracy of greed among bankers, investors, rating agencies and regulators"

Sources

"Gain & pain." Commonweal, vol. 143, no. 16, 2016, p. 5. U.S. History in Context, link.galegroup.com/apps/doc/A466298499/UHIC?u=catholiccenhs&xid=f3899c1f. Accessed 3 May 2017.

McCumber, John. "How humanities can help fix the world." The Chronicle of Higher Education, 7 Oct. 2016, p. A29+. U.S. History in Context, link.galegroup.com/apps/doc/A467335460/UHIC?u=catholiccenhs&xid=c3600c5b. Accessed 3 May 2017.

"Not passing the buck; Buttonwood." The Economist, 17 Dec. 2016, p. 64(US). U.S. History in Context, link.galegroup.com/apps/doc/A473976726/UHIC?u=catholiccenhs&xid=7a54f347. Accessed 3 May 2017.

Tsang, Amie. "Morning Agenda: Breaking Up the Banks." New York Times, 8 Apr. 2017, p. NA(L). U.S. History in Context, link.galegroup.com/apps/doc/A488811468/UHIC?u=catholiccenhs&xid=a6a11787. Accessed 3 May 2017.

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Marcus Yaldo
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