Many factors directly and indirectly caused the ongoing 2007–2012 global financial crisis (which started with the US subprime mortgage crisis), with experts placing different weights upon particular causes.
The crisis resulted from a combination of complex factors, including easy credit conditions during the 2002–2008 period that encouraged high-risk lending and borrowing practices; international trade imbalances; real-estate bubbles that have since burst; fiscal policy choices related to government revenues and expenses; and approaches used by nations to bail out troubled banking industries and private bondholders, assuming private debt burdens or socializing losses. [1][2]
One narrative describing the causes of the crisis begins with the significant increase in savings available for investment during the 2000–2007 period when the global pool of fixed-income securities increased from approximately $36 trillion in 2000 to $70 trillion by 2007. This "Giant Pool of Money" increased as savings from high-growth developing nations entered global capital markets. Investors searching for higher yields than those offered by U.S. Treasury bonds sought alternatives globally.[3]
Causes of the 2007?2012 global financial crisis - Wikipedia, the free encyclopedia
Questions regarding bank solvency, declines in credit availability and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined.[13] Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts. In the U.S., Congress passed the American Recovery and Reinvestment Act of 2009. In the EU, the UK responded with austerity measures of spending cuts and tax increases without export growth and it has since slid into a double-dip recession.[14][15]
Many causes for the financial crisis have been suggested, with varying weight assigned by experts.[16] The U.S. Senate's Levin–Coburn Report asserted that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street."[17]
The 1999 repeal of the Glass–Steagall Act effectively removed the separation between investment banks and depository banks in the United States.[18] Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets.[19] Research into the causes of the financial crisis has also focused on the role of interest rate spreads.[
Financial crisis of 2007?2008 - Wikipedia, the free encyclopedia
