2008 Financial Crisis Essay

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Nate Gosbin The financial crisis of 2007/2008 was the largest and most severe financial event since the Great Depression and reshaped the world of finance and investment banking.The underlying cause of the financial crisis was a combination of debt and mortgage backed assets. In the 1980s financial institutions and traders realized that US mortgages were an untapped asset. Traders at Salomon Brothers were trying to take advantage of this untapped asset, and found that they could restructure mortgage payments into bonds and sell them to investors. The stock market crash of 2008 could have been avoided. In 2006, the Commerce Department reported that new home permits dropped 28%. This meant that new home sales would decrease over the next nine months and the first sign of trouble which was ignored. The next clear sign of trouble, ignored by the Fed, was an inverted yield curve which is when short term…show more content…
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