As bond profits fell, investors turned towards the housing market! 💵They hoped to gain profits from the interest on mortgages, a loan someone takes to buy a house
Lenders removed barriers to getting mortgages, allowing people without steady jobs and bad credit scores even if people could never pay them off
🚨Investors did not detect predatory lending practices yet and viewed mortgages as safe since housing prices kept ricing!
Soon borrowers could no longer pay their mortgages and put their houses up for sale
😳Now supply rocketed but demand crumbled
Housing prices crashed next and people’s mortgages were now more than the value of the house! 📈
Some hedge funds began to collapse and other institutions warned investors that they would not be able to withdraw their money
🤯 Major banks started closing and soon the stock market crashed
To combat the recession, the government introduced a program called TARP (Troubled Assets Relief Program) that lent money to banks
🏦 It was also known as the Bank Bailout
Federal Loans also spread to homeowners and other small businesses
🤝In 2009 an $800 million stimulus check was also released, aiding the recovery
To prevent some of the causes of the 2008 financial crisis, Congress passed the Dodd-Frank Law which added more reforms to prevent predatory lending, remove corrupt incentives, and improve transparency! 🤑