1980s Financial Crisis Summary

"Beginning in 2007 and lasting into 2009, the U.S economy suffered the worst financial crisis since the great depression of the 1930s." The cost of such crisis is the destruction of income, and jobs where it ended up with 15 million people below the poverty power. The financial crisis was not all of the sudden, it was caused by out of control industry. Since 1980s, the rise of U.S financial sector has led to a series of severe Financial crisis. Each crisis has cost more damage, while the industry has made more and more money. In 1980s Financial industry exploded, the investment banks went public; giving a huge amount of stock holders money. In 1982 the administration of regulated savings and loans companies allowed these investment banks to

In the absence of Federal actions and a clear failure in regulation, Such Financial crisis happened without any intentions. At the heart of the crisis was a problem in the market for mortages. For many years, when home buyers pay their monthly mortage payments; payments go directly to the lenders. securitizing Home Mortgages means that groups of mortgages were bundled together and sold to investors. The investment banks combine these mortgages and other loans to create complex derivatives called CDOs and sell them to investors. TThe investment banks pay the rating agencies to evaluate CDOS and give them AAA which is the highest investment rates. This system was taking time bond, lenders didn't care whether the borrower could repay so they started making risky loans. The investment banks' main concern was to sell more CDOS so their profits would increase highly. The rating agencies which were paid by the investment banks had no liability if their ratings to CDOS proved wrong. Without regulations, there was pop out of loans that was given to people who could not repay them. Banks and other financial institutions were loosening the standards for granting