SOSC 2340 Study Guide - Final Guide: Subprime Lending, George W. Bush, Economic Globalization
16 Aug 2019
School
Department
Course
Professor
Document Summary
2008 financial crisis was predictable and predicted. Combination of the deregulated market that was liquid, low-interest rates, global real estate bubble, skyrocketing subprime lending. The housing bubble broke, prices fell and many homeowners found themselves underwater as they owed more in mortgages than the value of the house itself. American economy fueled by high levels of consumption, but with stagnating income levels this was hard to sustain. Solution: encourage borrowing, which only leads to americans going deeply into debt. Mortgage equity withdrawals used to finance other consumption hit a high of billion in one year, borrowing was conducted on the basis of confidence in the increase of prices in the housing market. The economy running on borrowing was unsustainable and the bubble was bound to burst. When the bubble broke it first affected the worst mortgages (sub- prime, lent to low-income individuals), then affected all residential real estate.
