In the early 2000s, all investor eyes were on the housing markets.
Lenders removed barriers to getting mortgages, allowing people without steady jobs and bad credit scores to buy homes
🚨 But investors were unfazed, viewing mortgages as safe since housing prices kept rising rapidly!
Soon borrowers could no longer pay their mortgages and put their houses up for sale
😳 Now supply rocketed but demand crumbled
Housing prices crashed next and many people’s mortgages were now more than the value of the house! 📈
Some hedge funds began to collapse and other institutions warned investors that they would not be able to withdraw their money
🤯 Major banks started closing and soon the stock market crashed in 2008
To combat the recession, the government introduced a program called TARP (Troubled Assets Relief Program) that lent money to banks
🏦 It was also known as the Bank Bailout
Federal Loans also spread to homeowners and other small businesses
🤝In 2009 an $800 million stimulus check was also released, aiding the recovery
To prevent some of the causes of the 2008 financial crisis, Congress passed the Dodd-Frank Law which added more reforms to prevent predatory lending, remove corrupt incentives, and improve transparency! 🤑