Causes of Subprime Crisis

1
1. Dot-com Bubble Burst (2001)
  1. US Federal Reserve cuts interest rates
5
1. Subprime loans failed (2007)
  1. Asset-backed securities
    1. Liquidity Crisis
2
1. Fannie Mae and Freddie Mac (2002)
  1. Purchased large amount of subprime mortgage {Mortgage Loan}
    1. Investors put money into real estate
      1. Home prices appreciation begin
        Demand for housing increased {Mortgage Loan}
        Housing prices drove up
3
1. Leveraging restrictions lifted (2004)
  1. Finanacial Institutions
    1. Issued huge amounts
      1. Mortgage-backed securities (Mortgage Loan)
4
1. Mortgage loan terms changed (2006)
  1. Interest Rates Rose
    1. Families couldn't afford homes
      1. Houses went into foreclosure {Mortgage Loan}
        Excess Supply of homes {Foreclosure}
        Home prices declined rapidly
6
1. 2008
  1. Global stock markets fell {Liquidity Crisis}
    1. People cannot repay loans {Liquidity Crisis}
      1. Foreclosures increased
        More homes on sale
  2. Lehman Brothers {Mortgage Crisis}
    1. Filed bankruptcy protection
      1. Recession

Resource summary

	Created by chanelbaohui almost 9 years ago