Sunday, December 29, 2019

Financial Crisis Of 2008, The United States Economy

In 2001, the U.S. economy experienced a mild, short-lived recession. Although the economy nicely withstood terrorist attacks, the bust of the dotcom bubble, and accounting scandals, the fear of recession really preoccupied everybody s minds. Financial crisis of 2008, started in 2001 after the U.S. economy went through â€Å"a mild, short-lived recession† (Financial Crisis 2007/2008 Overview). To start things off, the crisis happened because of one major reason; mortgages. When someone is trying to buy a house, they need to take out a huge sum of money from the bank. In return, the bank acquires a piece of paper called a mortgage. Then, every month, the new home owner will need to pay to bank, or whoever is the owner of that paper mortgage, a small portion of that mortgage plus a small interest. Banks like this because they can not lose. They either will make their money back plus interest or if the home owner defaults, does not make their payments to the bank each month, the bank will get the house which they will then sell to someone else. This didn t start with just the banks, in the early 2000’s many U.S. investors and other large investors from around the world wanted to do what they do best. Find low risk, high reward opportunities to invest their money into. They chose to throw their money into the United States housing market, thinking they would make a greater interest then if they invested in United StatesShow MoreRelatedThe 2008 Financial Crisis Essay1326 Words   |  6 Pagesintroduction The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking (Zandi, 2008). 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