2008 Financial Crisis: Courtesy the Housing Bubble? The 2008 financial crisis that affected the global economy ended up causing about two trillion dollars in damage. Results of this analysis shows us that deregulation of the derivatives market realised in a rise in precarious investments and this then caused an increase in real estate costs that in turn led to a speculative bubble. Through this report we find that the crisis was the result of a series of poor and ill-advised decisions by the govt., the investors as well as the financial institutions. Priyom Das, 3067, TY-A, Symbiosis School of Economics The fall of the Lehman Brothers, an apex global bank, in September 2008 ended up bringing down the financial system of the world. It took …show more content…
Some of these so-called subprime mortgages held low “teaser” interest rates in the earlier years that swelled to double-digit rates in the later years. Some included prepayment sanctions which made it prohibitively expensive to refinance. These characteristics were easy to miss for first time home buyers, many of them naïve in such matters, who were so beguiled by the prospect that, no matter what their income or their paying ability to make a down payment, they could own a …show more content…
What began as insurance, however, turned quickly into speculation as financial institutions bought or sold credit default swaps on assets that they did not own. As early as 2003, Warren Buffett, the renowned American investor and CEO of Berkshire Hathaway, called them “financial weapons of mass destruction.” About $900 billion in credit was insured by these derivatives in 2001, but the total soared to an astounding $62 trillion by the beginning of