FINANCIAL CRISIS

We will talk about how the 2008 Financial Crisis happened and how the government responded to the United States: So let's get started The Financial Crisis of 2008 was a big deal. Ben Bernanke said there was a possibility of a global financial crisis in the 1930's with catastrophic consequences. first we have to do a quick explanation about the mortgage debt. And you may already know this, but basically someone who wants to buy a house will usually borrow hundreds of thousands of dollars from the bank. In return, the bank receives a paper, called a mortgage. Every month, the landlord must return part of the policy, plus interest, to anyone holding the paper. If they stop paying, that is automatically called. And anyone with that paper gets a house. The reason I say anyone who owns a paper, instead of a bank, is because the bank, the first lender, usually sells that money to the third. And the reason I always say that this happens all the time. I have had my home for nine months, and three different banks have mortgaged. Traditionally, it was very difficult to get a mortgage loan if you had a bad debt or did not have a steady job. Lenders were not just trying to put themselves in the wrong place at the wrong time, but in the 2000's, all of that began to change. And before we move on, quickly step aside here.

The story quickly becomes complex, and it is exciting. In the 2000's, investors in the U.S. and in other countries seeking less risk, higher return on investment began to throw their money into the U.S. housing market. The idea was that they could get a better return on interest rates on mortgages, than they could by investing in things like Treasury Bonds, which paid much lower, much lower interest rates. But big money, the world's investors did not want to just buy my loan, and Stan's debt. It is very difficult to deal with us as individuals. I mean, we're in pain. Instead, they buy an investment called mortgage backed-securities. Bonds backed by mortgages are created when major financial institutions receive mortgages. Basically, they buy thousands of home loans, put them together, and sell their stock to investors on the lake. Investors participate in mortgage-based securities. Also, they paid a higher price for what other investors could get in other places and they looked like really bad badges. First, house prices kept rising and falling. So lenders think, in the worst case scenario, the borrower is unable to borrow money, we could just sell the house for more money. At the same time, debt rating agencies were telling investors that these mortgage-backed loans were safe.

They have provided many of these AAA ratings for securities backed by borrowed goods - the best. And back then when mortgages were made for borrowers with only good credit, mortgage debt was a good investment. Still, investors were eager to buy more and more of these securities. Therefore, lenders do all they can to help create many of them. But to build many of them, they needed additional housing loans. So lenders are lowering their standards and lending to low-paying people and bad debts. You will hear these so-called sub-prime mortgages. Eventually, some institutions even resorted to so-called extinction practices to obtain housing loans. They make loans without guaranteeing income and offer unreasonable, adjustable loans with payments that people could not afford to pay in the first place, but who soon run out of bills. But these new forms of microfinance were brand new. That meant that credit bureaux could now point to historical data showing that real estate debt was a safe bet. But it was not to be. These investments have been steadily declining in security. But investors trust the rates, and they continue to invest their money. Traders are also starting to sell more risky products, called collective debt bonds, or CDOs. Also, some of these investments have been given very high credit ratings from rating agencies, though most of them have been made by these very risky loans. While, investors and traders and banks are throwing money into the U.S. housing market, the price of U.S. housing. it was going up and down. New slower borrowing demands and lower interest rates have pushed up house prices, making only securities backed by loans and CDOs seen as even better investments. Borrowers began to default, which put many homes back on the market for sale. But there were no buyers. Therefore supply was high, demand was low, and housing prices began to decline. As prices fall, some borrowers suddenly fall into debt over their current home. Some have stopped paying. That led to more automation, further lowering prices. As a result, major financial institutions withdrew their mortgage loans and subcontractors began to fall into debt.