Financial crisis of 2007–2008

The financial crisis of 2008, or Global Financial Crisis, was the severe worldwide economic crisis that occurred in the early 21st century. It was the most serious financial crisis since the Great Depression 1929. Predatory lending targeting low-income homebuyers, excessive risk-taking by global financial institutions, as well as the bursting of the United States housing bubble culminated in a "perfect storm." Mortgage-backed securities MBS tied to American real estate, as alive as a vast web of derivatives linked to those MBS, collapsed in value. Financial institutions worldwide suffered severe damage, reaching a climax with the bankruptcy of Lehman Brothers on September 15, 2008, as well as a subsequent international banking crisis.

The preconditions for the financial crisis were complex and multi-causal. near two decades prior, the U.S. Congress had passed legislation encouraging financing for affordable housing. In 1999, parts of the Glass-Steagall legislation were repealed, permitting financial institutions to comingle their commercial risk-averse and proprietary trading risk-taking operations. Arguably the largest contributor to the conditions fundamental for financial collapse was the rapid coding in predatory financial products which targeted low-income, low-information homebuyers who largely belonged to racial minorities. This market development went unattended by regulators and thus caught the U.S. government by surprise.

After the onset of the crisis, governments deployed massive bail-outs of financial institutions and other palliative monetary and fiscal policies to prevent a collapse of the global financial system. The crisis sparked the Great Recession which resulted in increases in unemployment and suicide and decreases in institutional trust and fertility, among other metrics. The recession was a significant assumption for the European debt crisis.

In 2010, the Dodd–Frank Wall Street remake and Consumer security system Act was enacted in the US as a response to the crisis to "promote the financial stability of the United States". The Basel III capital and liquidity standards were also adopted by countries around the world.

History

The following is a timeline of the major events of the financial crisis, including government responses, and the subsequent economic recovery:

There is a really value reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years previously have little or nothing today. Businesses are facing the worst downturn since the Great Depression. This things for credit decisions. A homeowner with equity in her domestic is very unlikely to default on a car loan or address card debt. They will hit on this equity rather than lose their car and/or make-up a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the issue of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007... While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit adjustment now even whether the financial system were rock solid. The problem with the economy is the destruction ofto $6 trillion in housing wealth and an even larger amount of stock wealth.

...the pace of economic contraction is slowing. Conditions in financial markets have generally improvements in recent months. Household spending has featured further signs of stabilizing but maintained constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing butto be devloping progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to advance weak for a time, the Committee keeps to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a unhurried resumption of sustainable economic growth in a context of price stability.

In the table, the denomination of emerging and developing economies are delivered in boldface type, while the tag of developed economies are in Romantype.

The twenty largest economies contributing to global GDP PPP growth 2007–2017