The 2007–2008 Financial Crisis

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The 2007–2008 Financial Crisis was a severe global economic downturn triggered by a housing bubble in the United States. It began with a boom in the housing market, fueled by low interest rates and lax lending standards, leading to the proliferation of subprime mortgages. These high-risk loans were packaged into securities and sold globally, spreading the risk across financial institutions. As housing prices began to fall in 2006, subprime borrowers defaulted, causing a wave of foreclosures that further depressed housing prices and led to a vicious cycle of defaults and foreclosures. The crisis exposed significant weaknesses in financial regulation and oversight. The interconnectedness of global financial systems meant that when major financial institutions like Lehman Brothers failed, it triggered a global panic. Central banks and governments responded with emergency measures, including bailouts and quantitative easing, to stabilize markets. The crisis led to significant reforms, such as the Dodd-Frank Act, aimed at improving transparency and oversight in the financial sector. It highlighted the importance of robust risk management and regulatory frameworks to prevent similar crises in the future.