Question

In: Finance

What caused the Great Recession and give a description of the event

What caused the Great Recession and give a description of the event

Solutions

Expert Solution

There were a plenty of factors that caused great recession like substandard lending and Bad ratings assignment of securities, International trade imbalances and irrational mortgage and inflation of housing sector.

It began when a lot of borrowers were mortaging their house property as they felt that houses were hedged against any depreciation in value. The bank were issuing substandard loans based upon the mortgage and investment bankers wrote off the derivatives which had real estate as underlying assets as they also felt that housing sector was hedged completely. Insurance sector also Wrote off the bank CDS.

This led to an irrational inflation of securities in the real estate market and one default led to another as entire bull run was based upon bubbling up of assets valuation and it led to a widespread triggering of offloading of real estate assets leading to banks & investment bankers to collapse with insurance sectors leading to a great depression.

FED came to the rescue with intervention through various liquidity injection programme and bailout to save American markets and it stabilized through various mergers and haicuts .It took some time before things were back at normalcy.


Related Solutions

What caused the Great Recession to occur in 2008, and as result, what happened to equilibrium...
What caused the Great Recession to occur in 2008, and as result, what happened to equilibrium real GDP, the unemployment rate,and the price level? Using the aggregate demand and aggregate supply model to explain what caused this.
what is the Threat to biodiversity in the Great basin desert?give description, what is it, where,...
what is the Threat to biodiversity in the Great basin desert?give description, what is it, where, actual herm and 2 statistics related to the threat.
what caused the Recession 2007-2009
what caused the Recession 2007-2009
Explain the COVID-19 recession severities to the Great Depression and the Great Recession.
Explain the COVID-19 recession severities to the Great Depression and the Great Recession.
Give a brief history of the “Great Recession”—be sure to explain the practices in the mortgage...
Give a brief history of the “Great Recession”—be sure to explain the practices in the mortgage industry that helped lead to it and how it eventually affected the national economy.
What was the similarities and difference between the great depression and the great recession 2007-2009?
What was the similarities and difference between the great depression and the great recession 2007-2009?
What is the Bank Regulations during 2007-2009 ( Great Recession ) ?
What is the Bank Regulations during 2007-2009 ( Great Recession ) ?GIVE DEFINITIONS ABOUT ALL OF THESE TERMS:TARP; HERA; Federal Housing Finance; Regulatory Reform Act of 2008; HOPE for homeowners act of 2008; SAFE Secure and Fair Enforcement for Mortgage Licesing Act of 2008; Forecosure Prevention Act of 2008 and FHA Modernization 2008; Emergency Economic Stabilization Act of 2008; Helping Families Ave Their Homes Act of 2008.
What was the relationship between “financialization” and the Great Recession of 2008-09?
What was the relationship between “financialization” and the Great Recession of 2008-09?
Find a current event article that discusses politics. Give a brief description of the article without...
Find a current event article that discusses politics. Give a brief description of the article without giving your opinion and pose a question to the class. Be sure to include a link and reference to the article so we can find it.
What recent event caused growth in the federal bureaucracy ? What branch is responsible for it?
What recent event caused growth in the federal bureaucracy ? What branch is responsible for it?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT