The banking crisis of 2008 was because of one thing, greedy people. There were five culprits to this tragedy, the home buyers, the brokers, the mortgage lenders, the investment banker, and the investors. The 2008 banking crisis became a crisis because the five culprits were greedy. I plan to explain to you the reader how the 2008 banking crisis happened, what the government did because of the crisis, and how it affected us as the consumers.
How did the 2008 banking crisis happen? Two words subprime mortgages, these mortgages are for people with bad credit history and probably will default on their mortgages. Subprime mortgages were set in place by brokers who sell houses to home buyers on behalf of mortgage lenders (Crashcourse). Mortgage lenders would then sell their mortgages to investment bankers who would buy thousands of mortgages from lots of mortgage lenders (Crashcourse). These investment bankers would then make collateralized debt obligations (CDO). At the time the CDOs had the greatest return on investment out there and it was the safest place to invest money. These CDOs where rated AAA by rating companies and investors purchased
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Besides the public not trusting banks, it became hard to get decent loans. Even though the bank had this bailout money, there was no more subprime mortgages so you had to have good credit to get a loan (Melvin Padgett). The market was flooded with houses so people couldn’t sell homes, which resulted with people going bankrupt or pay super high mortgages for houses that were not worth the note. People also lost many homes for two reasons. The first is subprime mortgages, if you had a subprime mortgage the payments were low and a fordable at first then ballooned into a payment the home owners could no longer pay. The second reason is the value of homes were declining, people’s mortgages were higher than the value of the house so they quit paying it (David