The stock market crash of 2008 did not take place all of a sudden. Pain is relative, and a relatively quick loss of 50% of my meager life savings at the time was painful. At the time, few people realized how volatile and complicated this
I say 50% of my life savings because I was still defining my risk tolerance at the time. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
But just because the fear of market decline was overshadowed by the broader economy does not mean the stock market slide was easy to digest. President Bush announces that he will host an international conference of financial leaders on Nov. 15, 2008.
Also, Citigroup (C) acquires Wachovia, then the fourth-largest U.S. bank. 2007. This increases the home rates at the accelerated speed thus causing the “housing bubble”.The changing scenario of banks helped them to offer the subprime mortgage loans that are either structured with the balloon payments (due to the large payment by the end or near the end of the loan period) or with the adjustable interest rates.The increase in the prices of homes helped the subprime borrowers to protect themselves from the high mortgage payment with different options offerings like refinancing, borrowing against the increased value of the home, selling home at good profits, etc.In such a prevailing case, the bank can repossess the property and sell it at a higher price than the original loan.This encouraged many banks to market subprime loans to customers having poor credit assets. On Sept. 18, 2008, talk of a government bailout began, sending the Dow up 410 points. While good intentions were likely the catalyst leading to the decision to expand the subprime mortgage market back in 1999, somewhere along the way the United States lost its senses. Such bonds that consist of mortgage known as mortgage-backed securities or MBSs.Selling and buying subprime mortgages was considered to be a good way.Selling subprime mortgage increased the liquidity thus reducing the exposure to risky loans while the purchasing MBSs helped banks to diversify the portfolio and to earn money.The increasing value of the home had made MBSs popular that increased the prices in the capital market accordingly.The fourth cause of the crash of 2008 was found to be the depression era Glass Steagall Act (1933) that allowed banks, securities firms and other insurance companies to enter into each other’s markets resulting in the formation of the bank that was too big to fail.Also, the SEC in 2004, weakened the net capital requirement thus encouraging the bank to invest more money in MBSs. Read on to learn how the explosive growth of the
The crisis began in the subprime lending market, but eventually spread widely into the financial markets and later, led to widespread recession. Record stock market falls in 2008 Chinese shares saw some of the steepest falls in 2008. The economic recession in 2008 was predicted by many eminent personalities way in advance. Another popular investment vehicle during this time was the The financial chaos raised due to stock market crash 2008 led toBut the major question is how the stock market crash 2008 took place? Borrowers could end up with positive In the up-trending market that existed from 1999 through 2005, these mortgages were virtually risk-free. A financial crisis is a situation where the value of assets drop rapidly and is often triggered by a panic or a run on banks. December 12, 2008: Russia; Andrei Klepach, a deputy economics minister of Russia, states that Russia has entered the recession, with two quarters of contraction expected, meaning Russia will fall short of reaching the 6.8% growth forecast for 2008.
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