Executive Summary: The 2008 Financial Crisis

598 Words 3 Pages
Section 3
The financial crisis of 2008 jolted the structure of the economy and affected numerous sectors. These crises occurred because of numerous reasons that stacked up and created a horrendous long-term impact for the overall economy. The financial crisis cost appears to be $5 trillion to $15 trillion. The stock markets fell miserably after this demise, and strategists were unable to control this demise. Several players played their roles in this demise, and players like banks, firms, individuals contributed a lot in developing the overall financial crisis of 2008.
The credit crisis starting initially with the decline in the housing market, and this eventually led to numerous mortgage defaults. The securities affected negatively from this perspective, and this scenario lowered down the value of mortgage-backed securities. Investors suffered because of the extreme loss of the mortgage market. Global asset prices fell at a rapid pace, and this scenario dried up the level of liquidity from the market that
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Subprime mortgage refers to mortgage securities backed by securities with high credit and default risks. The investment banks created clubs or pools of securities with a wide range of securities that included subprime mortgages. The investment banks sold the securities to investors throughout the world without appreciating the long-term consequences of the decline in housing prices. The rapid decline in housing prices in the United States started a domino effect throughout the world (Friedman, 2011). The fallout led to the collapse of several investment banks and financial services firms, especially the organizations with a significant exposure of subprime mortgages. The significant decline in housing prices and the disintegration of large financial institutions created a panic among the public and

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