Manyeconomistsandanalystsconsidertheglobaleconomicdownturninthepast4yearstobetheworstfinancialcrisis

Manyeconomistsandanalystsconsidertheglobaleconomicdownturninthepast4yearstobetheworstfinancialcrisis

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FRL 315 Dr. Lin Tan Group Project #8 Lyle Le Christy Wong Jenny Gip 11-29-11
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Many economists and analysts consider the global economic downturn in the past 4 years to be the worst financial crisis the world has witnessed since the Great Depression of the 1930’s. The U.S. Bureau of Economic Analysis reported that real gross domestic product in the U.S. was declining more rapidly than any period in the past 50 years and U.S. domestic demand and capital investment were at record lows. In October 2009, the U.S. almost reached its highest rate of unemployment (10.4%) since 1948 and companies around the world depreciated in over $14.5 trillion in value. The global economic recession occurred as a culmination of several failures. Perhaps the most significant of these contributors to the current economic state of the U.S. was the subprime mortgage crisis and real estate market collapse. The U.S. Subprime Mortgage Crisis and the Housing Bubble In 2008, the U.S.’s real estate market suffered an overwhelming amount of foreclosures on property as many homeowners were unable to pay their mortgages and defaulted on their loans. This in turn led to the bankruptcy and failure of many financial institutions and banks around the country who had made these loans. When a prospective home buyer applies for a mortgage loan, they must possess a certain level of credit rating and history to ensure that they are capable of affording and maintaining the costs and payments of their loans. For those who do not meet the standard requirements for obtaining a loan to finance the payments of a home, there is the option of subprime lending: loans with higher interest rates and less favorable terms. Regardless, at the time, interest rates were low, making it more affordable for more people to take out loans and purchase homes. Borrowers also speculated that real estate in the U.S. would appreciate and therefore would be
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safe to invest in. Within 10 years, from 1994 to 2004, home ownership in the U.S. grew from 64% to a record high of 69.2%. Over the past decade years, financial institutions and lenders saw less regulation in their business, particularly through the 1999 repeal of the Glass–Steagall Act of 1933, which allowed investment banks to utilize funds obtained through depository banks. Lenders began to grant
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Manyeconomistsandanalystsconsidertheglobaleconomicdownturninthepast4yearstobetheworstfinancialcrisis

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