The Financial Crisis And The Collapse Of The World Wide...

The 2008 financial crisis was one of the worst economic times since the 1929 Great Depression. It led a worldwide economical, social, and political instability that shook the very foundation of the term â€Å"laissez-faire†, or free market. Millions of people around the world lost their homes and their jobs, while large corporations and entire countries were at the brink of insolvency. Others, who are as unfortunate, lost their life savings and pension funds. But it is important to question what led to the events toward the collapse of the world wide financial system. In an era of low interest rates and easy credit, home ownership appeared to be a great investment. World housing prices rose drastically in 2005 to 2007, and a great majority of the population began buying up houses – even if they could not afford them. Subsequently, countries began massive construction projects of apartments and condos, in speculation that their values will continue rising, despite the f act that much of them remained unoccupied. Lenders saw an excellent opportunity to make money, and in sense, lowered their rates and requirements to acquire a home mortgage. Such mortgages came to be known as â€Å"subprime mortgages†. Those lenders then sent those packages of mortgages to investors and financial institutions, e.g banks, hedge funds, and individuals. Each mortgage was rated for how likely each family was able to pay off the loans. Some of the largest American banks who hoped to take a big profit fromShow MoreRelatedThe World Experienced A Tremendous Financial Crisis Essay1131 Words   |  5 Pages the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. 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