The Mortgage Crisis
The crisis that struck 2008 – 2009 was known as the Mortgage Crisis. What the Mortgage Crisis was started with home mortgage market and just continued to go beyond that to the point that U.S. banks were losing a lot of money or were going into debt (Moseley). The whole mess had started “In the early 2000’s, mortgage interest rates were low, which allowed you to borrow more money with a lower monthly payment” (Pritchard). With how easy it was for people to get money pretty much anyone was able to get money despite their bad or good credit. This didn’t just happen overnight, it was the unfortunate result of made poorly made decisions. With the repeal of The Glass-Steagall legislation (separated regular banks and investment backs) in 1998 banks were essentially able “to engage in highly risky business” (Denning). He goes on to say that many other reasons why like the low interest rates had fueled it, asset managers were seeking new ways to make money, credit rating agencies had said that it was okay, fund manager didn’t really have a real understanding of what they were doing and much more. Moseley even says that “higher profits and the continued weakness of business investment was that financial capitalists had lots of money to lend, but non-financial corporations did not have much need to barrow.” This in turn caused them to look for others that were willing to barrow and soon saw that workers would fit the criteria perfectly, so they focused more on them then investing in their business (Moseley). So as a result it cause a domino effect starting in 1998 and steadily getting worse. People felt that going along with the mortgage was a safe thing and nothing could do wrong. Well it went wrong and real quick. “Home Prices stopped going up…borrowers who bought more home than they could afford stopped paying the mortgage. Monthly payment increased on adjustable rate mortgages as interest rates rose” (Pritchard). By 2006 a great deal of “defaults and foreclosures on subprime mortgages…led to a subprime mortgage crisis…Due to the complex repackaging of subprime mortgages into investments, this crisis in the housing market contributed to a financial meltdown in 2008 that contributed to a national economic disaster” (Bryant & McGrarth). With the all the defaults on loans banks lost a lot of money and even with the FDIC, some of the banks had fallen really far. The result of it was the economy suffered, consumers and businesses also suffered (Pritchard). The mortgage crisis would end up costing a lot of people their money and their homes. Sending the nation into a great recession.
The crisis that struck 2008 – 2009 was known as the Mortgage Crisis. What the Mortgage Crisis was started with home mortgage market and just continued to go beyond that to the point that U.S. banks were losing a lot of money or were going into debt (Moseley). The whole mess had started “In the early 2000’s, mortgage interest rates were low, which allowed you to borrow more money with a lower monthly payment” (Pritchard). With how easy it was for people to get money pretty much anyone was able to get money despite their bad or good credit. This didn’t just happen overnight, it was the unfortunate result of made poorly made decisions. With the repeal of The Glass-Steagall legislation (separated regular banks and investment backs) in 1998 banks were essentially able “to engage in highly risky business” (Denning). He goes on to say that many other reasons why like the low interest rates had fueled it, asset managers were seeking new ways to make money, credit rating agencies had said that it was okay, fund manager didn’t really have a real understanding of what they were doing and much more. Moseley even says that “higher profits and the continued weakness of business investment was that financial capitalists had lots of money to lend, but non-financial corporations did not have much need to barrow.” This in turn caused them to look for others that were willing to barrow and soon saw that workers would fit the criteria perfectly, so they focused more on them then investing in their business (Moseley). So as a result it cause a domino effect starting in 1998 and steadily getting worse. People felt that going along with the mortgage was a safe thing and nothing could do wrong. Well it went wrong and real quick. “Home Prices stopped going up…borrowers who bought more home than they could afford stopped paying the mortgage. Monthly payment increased on adjustable rate mortgages as interest rates rose” (Pritchard). By 2006 a great deal of “defaults and foreclosures on subprime mortgages…led to a subprime mortgage crisis…Due to the complex repackaging of subprime mortgages into investments, this crisis in the housing market contributed to a financial meltdown in 2008 that contributed to a national economic disaster” (Bryant & McGrarth). With the all the defaults on loans banks lost a lot of money and even with the FDIC, some of the banks had fallen really far. The result of it was the economy suffered, consumers and businesses also suffered (Pritchard). The mortgage crisis would end up costing a lot of people their money and their homes. Sending the nation into a great recession.