2008 Mortgage Crisis in the United States

Introduction

No doubt that the global crisis started with the financial crisis in the United States specifically due to Mortgage lending. In this article we will discuss the causes and consequences of the financial crisis in the U.S. Let us examine some of the mechanisms.

The Causes of the Financial Crisis in the U.S

The U.S. financial crisis began in late 2006 with the mortgage crisis in the sector of subprime (poor-quality loans), which appeared due to huff a bubble in the mortgage market caused by the Fed's low interest rates, abundant liquidity and the frivolous attitude of mortgage companies to the borrowers. A chain reaction around the world caused by the fact that mortgage companies trying to get out of difficult situations with low-quality mortgages, mortgages were sold under the mortgage (mortgage) to institutional investors in the U.S. and other countries.

When real estate prices in the U.S. fell, the company bought these mortgages, incurring huge losses as the price of real estate was much lower than the price of mortgages. The U.S. housing bubble was blown away - hit the global economy. In fact, the U.S. mortgage companies gained unfair, poor speculative clients, and when the debt no longer give away, resell mortgages to other companies around the world who have suffered huge losses on themselves (search.proquest.com).



The Consequences of the Financial Crisis in the U.S

The most striking effects of the financial crisis in the U.S. have become nationalized mortgage agencies Fannie Mae and Freddie Mac, the bankruptcy of the largest U.S. banks and systemically insurance giant AIG. And in September 2008 in the U.S. mortgage crisis triggered a liquidity crisis world banks. Thus, because of the financial crisis in the U.S. went bankrupt bank Bear Stears, Bank Lehman Brothers bankruptcy and Merrill Lynch was bought by Bank of America. The Fed has bought 80% stake in American International Group (AIG) the world's largest insurer, in effect nationalizing it.

As a result pillars of the U.S. financial system in distress, or disappear altogether. The Fed has created a fund to buy out bad debts, and to maintain the country's financial system was adopted by the Paulson plan. The essence of the plan is to create a public corporation, which will deal with purchase troubled assets from banks, it stands out on the $ 700 billion, subsequently refused to buy the assets, but instead allocated $ 800 billion to banks to support consumer lending. Many experts believe that such actions the U.S. authorities during the crisis could lead to the devaluation of the dollar and undermine confidence in the American economic model, which is based on stimulating final demand with cheap loans (Hampel B., Schenk M., Rick S., 2008, pp. 3).

The influence of the U.S. Financial crisis on world stock markets

Besides the fact that the U.S. financial crisis has caused serious problems within the country, he influenced the entire world economy and caused the global financial crisis. This is due to the crisis on the world which collapses like a ...