What was a major cause of the US recession that began in 2008? defaults on mortgages for homes consumers not buying new homes damage from Hurricane Katrina a rise in the American stock market

Question

Hester

History

12 April, 03:17

What was a major cause of the US recession that began in 2008? defaults on mortgages for homes consumers not buying new homes damage from Hurricane Katrina a rise in the American stock market

+2

Answers (2)

Know the Answer?

Martin Reeves · Answer 1

The answer is A

Copper · Answer 2

The correct answer is: "defaults on mortgages for homes"

Loans had been freely dispensed by financial entities to particular individuals without collateral requirements encouraged by the low interest rates existing at those times. These were denominated subprime mortgages. Subsequently, financial institutions conducted securitization, which is a process that consists on pooling those subprime loans together and creating new financial instruments called mortgage-backed securities, that were sold to third parties that would bear the loan.

When mortgage defaults started to flourish, a worlwide financial crisis arose as not only the banking sectors but many different type of investors all over the world were affected by the non-payments and by the busting of the housing bubble.