Financial Crisis Origin
Financial Crisis Origin
This chapter explores the housing bubble phenomenon that led to the economic recession in the United States from 2007 to 2009. The first phase, from 2001 to 2004, was characterized by the availability of mortgage financing for home ownership facilitated by the lowering of overnight interbank borrowing costs (2001–2004) and the Congress-approved tax cuts (2001–2003). These initiatives were extended even more in the second phase, lasting until the end of 2007, when low mortgage rates encouraged Americans to take on massive mortgages for home ownership. People borrowed beyond their means in order to purchase properties with inflated values. Widespread borrowing ultimately led to financial crisis, which was completely felt at the turn of 2007. The chapter also discusses the rescue deals initiated in 2008.
Keywords: housing bubble, economic recession, United States, mortgage financing, home ownership, interbank borrowing costs, tax cuts, rescue deals
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