Question

Agree or disagree with the main ideas of the 2008 crisis. The 2008 crisis was the fall of the housing market. Banks were lending money to people that couldn't afford to buy houses and it eventually caused people and banks to go bankrupt. If you agree, find out specific events or ideas and provide examples. Explain this in the context concerning the importance, implications, and real-life examples of the issue. if you disagree, provide counterexamples.

Answer 1

Yes I will agree that that the 2008 financial crisia started with the fall of housing market but there is an inner arc of what happened during that period. Banks used to do hedge fund trading with derivatives so to support this trading banks started giving mortgage loans as it will give them interest income for a longer period. So when banks started giving mortgage loans without seeing the capacity of borrower it lead the people to create more demand for the housing market. At one point demand outpaced the supply of housing market which lead to the burst of housing market bubble which is growing at a faster pace during that period. During that period only federal reserve Bank changed its funds rates which changed the existing interest rates in mortgage loans.

After these events the housing market started to fall which made the borrower in a situation where they were not able to pay the loan which lead to more doubtful loans. During that period every bank did the same mistake which brought them to a situation where they cant even lend to each other. All this lead to fall of financial institutions and 2008 crisis.

During that period many banks went bankrupt position.