The 2008 financial crisis was a seminal moment in the history of global finance and markets. The entire global financial system was coming apart at the seams. Central banks, sovereign governments, financial organizations, businesses, and ordinary citizens were stunned by the swift collapse of global financial markets. It appeared that a calamity without comparison was about to befall the entire system.
The 2008 crisis did not start in a moment. It was the culmination of years of excesses. Intertest rates were held too low for too long, relaxed financial regulations made it easier to skirt the system, regulators were asleep at the wheel, rating agencies forgot who they were attempting to protect, mortgage companies made imprudent loans, and many financial companies took imprudent risks that were sure to backfire when the music stopped.
The idea of home ownership was the American dream. In fact the U.S. government did as much as they could to promote home ownership. The mortgage companies responded with products that only worked when interest rates were low, homes prices held up, and there was nearly full employment. Once those conditions changed, the game was up. In the end, there was lots of pain to go around and lots of blame to share.
Watch this compelling video for a deeper understanding of what transpired and how we can prevent this terrible episode from happening again in the future. This video is from Park University’s School of Business Distinguished Lecture Series (2013).