In the early 2000s, the housing bubble was blown across the United States. Real estate was flourishing with cash inflow from increase in demands, and investors poured money into the housing market in hopes of benefitting from it. George W. Bush stated, in 2002, “Owning a home is part of that (American) dream, it just is. Right here in America if you own your own home, you’re realizing the American dream.”
But behind the booming house market was a series of unregulated and unethical bank practices that so many Americans were bound to. A number of people began to default on their mortgage payments, and the prices of houses began to drop. Subsequently, the housing bubble burst in 2008, and the economy went into recession. It led to the greatest financial crisis since the Great Depression.
The financial crisis of 2008 was caused by a variety of factors, but economists recognize subprime mortgages as one of the root causes. In fact, the crisis is referred to as the “subprime mortgage
…show more content…
The bank’s role in the economy and promise of secure mortgages caused many Americans to trust them. The CDO mortgages had high bond ratings, and were claimed as “AAA secure.” However, these mortgages were far from it. They were poorly made and had high interest rate changes, which made these mortgages a great risk. Even the bond ratings were fraudulent; credit rating agencies only gave them high ratings because they worried banks would put them out of business. Furthermore, the banks didn’t reject anyone from getting these loans. They knew a lot of these people had poor credit, and couldn’t afford to pay these loans back. The entire CDO mortgage scheme was fraudulent from the start, making the banks to blame for the collapse. Promises of low interest rates and secure mortgages trapped thousands of Americans. But the banks faced little to no repercussions for their actions, and instead were bailed