庞中华硬笔书法The 2008 financial crisis is affecting millions of Americans and is one of the hottest topics in the Presidential campaigns. In the last few months we have en veral major financial institutions be absorbed by other financial institutions, receive government bailouts, or outright crash.
So what caud the financial crisis of 2008? This is actually the perfect storm which has been brewing for years now and finally reached its breaking point. Let’s look at it step by step.
Market instability
The recent market instability was caud by many factors, chief among them a dramatic change in the ability to create new lines of credit, which dried up the flow of money and slowed new economic growth and the buying and lling of asts. This hurt individuals, business, and financial institutions hard, and many financial institutions were left holding mortgage backed asts that had dropped precipitously in value and weren’t bringing in the amount of money needed to pay for the loans. This dried up their rerve cash and restricte
刑事和解协议书d their credit and ability to make new loans.
曹植洛神赋There were other factors as well, including the cheap credit which made it too easy for people to buy hous or make other investments bad on pure speculation. Cheap credit created more money in the system and people wanted to spend that money. Unfortunately, people wanted to buy the same thing, which incread demand and caud inflation. Private equity firms leveraged billions of dollars of debt to purcha companies and created hundreds of billions of dollars in wealth by simply shuffling paper, but not creating anything of value. In more recent months speculation on oil prices and higher unemployment further incread inflation.
How did it get so bad?
Greed. The American economy is built on credit. Credit is a great tool when ud wily. For instance, credit can be ud to start or expand a business, which can create jobs. It can also be ud to purcha large ticket items such as hous or cars. Again, more jobs are created and people’s needs are satisfied. But in the last decade, credit went uncheck
ed in our country, and it got out of control.
黑板报模板Mortgage brokers, acting only as middle men, determined who got loans, then pasd on the responsibility for tho loans on to others in the form of mortgage backed asts (after taking a fee for themlves originating the loan). Exotic and risky mortgages became commonplace and the brokers who approved the loans absolved themlves of responsibility by packaging the bad mortgages with other mortgages and relling them as “investments.”
澳洲国立Thousands of people took out loans larger than they could afford in the hopes that they could either flip the hou for profit or refinance later at a lower rate and with more equity in their home - which they would then leverage to purcha another “investment” hou.
A lot of people got rich quickly and people wanted more. Before long, all you needed to buy a hou was a pul and your word that you could afford the mortgage. Brokers had no reason not to ll you a home. They made a cut on the sale, then packaged the mortgage with a group of other mortgages and erad all personal responsibility of the lo
an. But many of the mortgage backed asts were ticking time bombs. And they just went off.
The housing market declined
The housing slump t off a chain reaction in our economy. Individuals and investors could no longer flip their homes for a quick profit, adjustable rates mortgages adjusted skyward and mortgages no longer became affordable for many homeowners, and thousands of mortgages defaulted, leaving investors and financial institutions holding the bag.
This caud massive loss in mortgage backed curities and many banks and investment firms began bleeding money. This also caud a glut of homes on the market which depresd housing prices and slowed the growth of new home building, putting thousands of home builders and laborers out of business. Depresd housing prices caud further complications as it made many homes worth much less than the mortgage value and some owners cho to simply walk away instead of pay their mortgage.
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忌讳The credit well dried up
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The massive loss caud many banks to tighten their lending requirements, but it was already too late for many of them… the damage had already been done. Several banks and financial institutions merged with other institutions or were simply bought out. Others were lucky enough to receive a government bailout and are still functioning. The worst of the lot or the unlucky ones crashed.
The Economic Bailout is designed to increa the flow of credit
Many financial institutions that are saddled with risky mortgage backed curities can no longer afford to extend new credit. Unfortunately, making loans is how banks stay in business. If their current loans are not bringing in a positive cash flow and they cannot loan new money to individuals and business, that financial institution is not long for this world - as we have recently en with the fall of Washington Mutual and other financial institutions.
