Answer to Question #306205 in Finance for Comfort

Question

Discuss the main causes of the financial crisis of 2008? Identify the main risk that contributed to this crisis

Answer 1

causes

The collapse of the subprime mortgage market — defaults on high-risk housing loans — is cited by economists as the primary cause, which resulted in a credit crunch in the global banking system and a sharp drop in bank lending.

Furthermore, the Great Recession was a "unavoidable" tragedy caused by systemic failings, including regulatory failures and dangerous Wall Street activities. While the relative importance of each factor is still being discussed, the Great Recession serves as a warning tale about risk, investing in what you know, and the hazards of placing complete trust and faith in financial experts and institutions.

main risk

The economic crisis was precipitated by the collapse of the housing market, which was fueled by low interest rates, cheap lending, poor regulation, and hazardous subprime mortgages.