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In: Economics

“What caused the financial crisis? The Big Lie goes viral.

“What caused the financial crisis? The Big Lie goes viral.

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Expert Solution

Financial crisis or we could say subprime mortgage crisis which where is a global economy in year 2007 -08 , US bank had lend money to subprime borrow hours and 30 September was fails to pay back the loan they had taken.loans where giving during real estate boom time but when the bubble burst banks lost most of their money. Badly affected banks include name like Lehman brothers , Merril Lynch etc.
Following are the causes of subprime crisis or financial crisis:

Cheap money:- US Federal reserve purchased a policy of drastically sinking interest rates. rising housing prices combined with the low rates promoted millions to use their homes has ATMs.

2. Greed:- the more risky investment that bankers sold the higher bonuses they received day we are not punished for losses causing them to promote ever larger risk.

rating agencies credit rating agency give top ranking to investment that had not until they were often paid by the company investment they wear rating.

the bubble burst in the housing market collapse leading to the failure of the so-called mortgage backed securities it was too late to change course. The downward spiral quitting brought down banks. government oversight did not want to the risk until it was too late and other warning went unheeded.

The financial industry took a deep hit, weight loss phase in the trillions of dollar and a loss of confidence in the banking industry the damage quickly grown into global recession and financial crisis.


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