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¶ … financial system trials tribulations starting early 2008. Indicate major reasons contributed financial market's collapse. Please leave a space reason. -College Level paperOrder ID
Five major factors that contributed to the financial market's collapse
Reason 1: Historically low interest rates
The first major contributor to the collapse of the worlds' financial markets was the housing bubble. The Federal Reserve dropped interest rates to historically levels after the September 11 terrorist attacks and the dot.com bubble burst. This was to generate more spending and borrowing and propel the nation out of recession. Low interest rates encouraged people to buy on credit. Many people took out mortgages, thinking that this was a good time to buy a house, and many others took out mortgages hoping to 'flip' a house, or sell it for more than they paid...
Many of these loans were adjustable rate mortgages, and as interest rates increased, more and more consumers defaulted. Some consumers did not fully understand the mortgage instruments they were purchasing, and brokers, eager to cash in on the boom, often pressured people to make potentially ill-advised decisions. Eventually, the housing market began to dry up, as more and more houses stood unsold. When people could not sell their homes and banks could not extend more mortgages, adjustable rate mortgages increased, and more and more people could not pay what they owed…
References
Shah, A. "Global financial crisis." Global Issues. 2010. [May 24, 2011]
http://www.globalissues.org/article/768/global-financial-crisis
"The reasons behind the global economic crisis." Fair Loan Rate. 2008.
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