Sellers’ homes’ remained on the market and were unable to be sold. There was an extreme amount of supply, but not enough demand. Major businesses also failed, and millions of people lost their jobs. There were major increases in depression amongst people experiencing financial issues. We witnessed alarming rates in suicides, homicides, divorces, homelessness and burglaries. Overall prices of supply reached all-time highs. Gas prices soared. Produce and other necessities became unaffordable. People found themselves In a major bind, and could not spend money as they were used to.
For quite a while, there was grave concern as to which way the economy would go, and today there is still concern. Would we be able to come out of this crisis? The housing market was a major issue during this crisis. Everyone dreams of having their own home and owning it one day. Many people would have never imagined a crash in the housing market. The reason why this was so unimaginable was that for so many years, real estate had been considered one of the most profitable, safest investments. People were getting loans to purchase homes, renting hoes out, buying fixer uppers and putting work into them to resale them.
People were purchasing additional homes in other cities/states. Real estate Agents were making major profits, and It was the business to get In to. Real estate had been really booming! Prior to 2008, during the Clinton and Bush administration, It was so easy for people to get access to money In order to purchase homes. People who had poor credit were getting loans with no problem. A person who had an annual Income of $25,000/yr was approved for a home that priced at $250,000 or more. Builders were steadily building new homes, we saw new home additions all over the place.
Banks were continuing to make creative financing packages to accommodate individuals, and people were utilizing this to their full advantage. We borrowed, borrowed, and over-borrowed. Our standards of living had been steadily rising over the years. It seemed as many didn’t think of the serious consequences we would face globally. Many people felt they were living the American dream. 2008-2009 was when everything came crumbling down. When the financial crisis hit In 2008-2009 and finances were no longer available, questions there were many questions as to why and what happened and how we got In this situation.
Several reasons are mentioned as to how we Increasingly close relations between Washington and Wall Street ; Influx of “new money’ Banking deregulation was one reason mentioned. This meant there was removal of regulations governing the banking system. People considered the repeal of the Glass Steal Act in 1999 (This act separated investment and commercial banking activities) to play a critical role in the financial crisis, as well as the Commodity Futures Modernization Act (United States federal legislation that officially ensured the deregulation of financial products known as over-the-counter derivatives). The
Glass Steal Act in 1999 helped maintain somewhat of stabilization to investors by disallowing one institution to act as both an investment and a commercial bank. They could also not act as both a bank and an insurer. This repeal contributed to banks, security companies, and insurance companies becoming competitive. The Commodity Futures Modernization Act was signed into law in 2000. It clarified the law so that most over-the-counter derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (ACE) or as “securities” under the federal securities laws.
Mortgage-backed securities and credit default swaps (CDC) were two types of derivatives that became noticeable during the housing boom. CDC were contracts that were similar to insurance policies which were typically for municipal bonds, corporate debt and mortgage securities that assured people that they would offer coverage for certain securities in the event of default. For this reason, CDC was extremely popular. The close ties between Washington and Wall Street contributed to the financial crisis as well.
There were enormous financial contributions from Wall Street to the political managing for constituents which contributed to this relationship. As far as “influx” of new money, as the US banking regulations was easing, other countries were experiencing a boom and looking for somewhere to invest. So who is to be blamed for this financial crisis and the problem with the housing market? Was it the government? Was it the banks? Was it Politicians? The blame was a global discussion during this time.
Amongst others playing a role included: ; mortgage lenders credit rating agencies insurance companies regulators governments sponsored entities investors owners Many also believed that those working in the financial industry that held high positions had lack of understanding as to what was going own. Others were said to have full knowledge of the financial situation, but were Just plain greedy. Regulators were blamed, again for the lack of expertise. Politicians were blamed for their role in repealing Glass Steal.
Government Lenders were blamed for their responsibility in purchasing and securing mortgages to ensure funds were always available. Alternative courses that could have been taken to possibly avoid getting in this tuition include cutting back on the amount of spending and borrowing, particularly credit histories. This would have pushed more people to be more responsible. There should have been a stricter screening process and companies should not have been so greedy.
Companies should have provided more education to the employees so there would have been better knowledge and understanding of what could possibly occur. If these actions would have been taken, we would have seen less companies going bankrupt, less defaults on loans and less unemployment rates. People came to the realization of the impact as it major affected households lovably. As things seem to have slightly leveled, the best course of action I think to take would be to educate ourselves on the countries financial situation and not be so full of greed.
Banks and Lenders should review their policies and consider making revisions, and have stricter policies against those they are loaning funds to. Since there is so much supply and not enough demand, I would also suggest slowing the building of any new houses until all of the ones that have been built are sold. There are many other ideas and thoughts out there that I am sure would help our country avoid being in this situation in the future.