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Causes And Effects Of The 2008 Financial Crisis

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Causes and Effects of the 2008 Financial Crisis

In December of 2007 a financial market meltdown hit the United States, quickly followed by the world's economy would see a recession that can be comparable to the stock market crash of 1929. There are many hypotheses to what caused the financial crisis of 2008, but the leading and most highly supported is that a combination of various economic players was a cause, with subprime lending playing the largest role. A subprime loan is a loan given to an individual that doesn’t have the economic backing, or credit score to get prime loan. These loans typically have a higher interest rate due to the risk the bank is taking when giving the loan (…….). Individuals who are given subprime loans are people …show more content…

The United States was able to pull back from the financial crisis and economic collapse in late 2008 and early 2009. It wasn’t until it was to late when the economy was on the edge of collapse that any actions was taken to address the problems that have been building for years. (The Cost of the financial crisis) There were various effects to the economy and the working people of America, and the world anywhere from loss of jobs, to bankruptcy of large companies and industries such as see with many automobile industries. A variety of different government interventions were used to stabilize banks and other financial sector firms, ranging from the Federal Reserve, to loans. Multiple programs such as the Treasury troubled assets relief program were put into place to insure that large national banks didn’t look assets to keep them open. If America lost the major banking industry, it would cause millions to loose their savings. The only issue is the Treasury troubled assets relief program was extremely expensive. By 2010 the government spend more than 500 billion to keep the banks open. The congressional budget office (CBO) estimated 73 billion of those funds came directly from take payers. (The Cost of the financial crisis). This was only one of tens …show more content…

Over a year and a half, the housing market lost nearly 5.9 trillion. This corresponds to a loss of nearly 52,900 dollars per household. The housing market soon turned around at the end of 2008, but it would not reach the value it once was. It was still down nearly 1.6 trillion dollars which equalized out to around 14,200 dollar losses in equity for each individual house in the country. (………) Not only were jobs lost and the housing market completely devastated, but many Americans had to take salary cuts in order to keep their jobs. With the increased interest rates on mortgages, and the decreased salaries caused many hard ships for individuals. The total wages lost during the recession was 360 billion dollars in the five quarters of 2008 (…….) This value is equal to nearly 3,250 dollars per U.S.

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