By Nicolas Borrillo
The 2008 Financial Crisis is widely considered to be the most catastrophic economic event since the Great Depression faced way back in the 1930s. It ultimately represented the largest internal failure of the financial system to perform its due dilligence. There were many causes and even more adverse impacts of the crisis not only on the US, but the entire world.
The crisis began with the formation of a real estate bubble in the late 1990s and into the early 2000s. When this bubble finally popped in 2006, it caused a series of chain reactions that ultimately led to the financial crisis. On this site, the audience is given the necessary tools to examine the reasons that led to the US real estate "bubble" to grow to the magnitude that it did up to 2007-2008 using graphs and figures. Furthermore, it demonstrates the core drivers of the crisis and shows the global impact of the crisis and the way in which it changed financial regulation.
The primary goal of this website is NOT to explain what happened during the Great Recession, but to allow for the audience to understand the causes leading to the financial crash and the Great Recession. By doing this, the audience can gain a clearer understanding of both the financial system, and how much it matters to every single person. Lastly, it demonstrates how those in positions of power oftentimes make decisions primarily for their personal gain, rather than their investors/clients, which has always been a major issue on Wall Street. At the conclusion, I will show how the actions of those involved in the crisis were corrected through regulation.
Key of important financial terms
- Mortgage: A mortgage is a loan that the borrower uses to purchase or maintain a home or other form of real estate and agrees to pay back over time, typically in a series of regular payments.
- Mortgage-Backed Security: an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued them. Only as "strong" as the actual mortages that make it up.
- Financial Institution (FI): a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange.
- Office of Thrift Supervision (OTS): a bureau of the U.S. Treasury Department that was responsible for issuing and enforcing regulations governing the nation's saving and loan industry.
- Federal Deposit Insurance Corporation (FDIC): insures deposits of commercial banks, protection of small depositors, safety net for banks and depositors, charges banks an insurance premium based on volume of covered deposits.
- Securities and Exchange (SEC): an independent federal government regulatory agency responsible for protecting investors, maintaining fair and orderly functioning of different securities markets.