Invention and Engineering

2008 financial crisis

A major worldwide financial crisis centered in the United States took place in 2008. The immediate cause of the crisis was the collapse of the 2000s U.S. housing bubble, which involved excessive speculation in property values by both homeowners and financial institutions, exacerbated by predatory lending and by deficiencies in regulation. The first phase was the subprime mortgage crisis, which began in early 2007 as mortgage-backed securities (MBS) tied to U.S. real estate, and a vast web of derivatives linked to those MBS, collapsed in value. A liquidity crisis spread to global institutions by mid-2007 and climaxed with the bankruptcy of Lehman Brothers in September 2008, which triggered a stock market crash and bank runs in several countries. The crisis exacerbated the Great Recession, a global recession that began in late 2007, and contributed to major crises in Iceland and the eurozone. During the 1990s, the U.S. Congress passed legislation intended to expand affordable housing through looser financing rules, and in 1999 parts of the 1933 Banking Act (Glass–Steagall Act) were repealed, enabling institutions to mix low-risk operations, such as commercial banking and insurance, with higher-risk operations such as investment banking and proprietary trading. As the Federal Reserve (Fed) lowered the federal funds rate from 2000 to 2003, institutions increasingly targeted low-income homebuyers, largely belonging to racial minorities, with high-risk subprime loans; this development went unattended by regulators. As interest rates rose from 2004 to 2006, monthly payments on these largely adjustable-rate mortgages spiked, leading to a wave of defaults, foreclosures, and bankruptcies among subprime lenders in early 2007. As housing demand and prices continued to fall, the financial contagion spread to global credit markets by August 2007. In March 2008, Bear Stearns, one of the largest U.S. investment banks, was sold to JPMorgan Chase in a "fire sale" backed by Fed financing. In response to the crisis, governments around the world deployed massive bailouts of financial institutions and used monetary and fiscal policy to prevent a collapse of the global financial system. On September 7, 2008, Fannie Mae and Freddie Mac, two government-sponsored enterprises which owned or guaranteed half of the U.S. housing market, were seized by the federal government.

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• ▸Functionality doctrine
• ▸Church of St Mary and All Saints, Chesterfield
• ▸History of television

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