A Retrospective on the Subprime Crisis and its Aftermath

Abstract

The paper focuses on researches about 2008 financial crisis. It uses past data and facts to explain the cause, process and aftermath of the event. It is stated that the lack of regulation in financial market enabled banks to release a lot of unqualified financial derivatives to those who were attracted by the seemingly high price of the housing market bubble. However, the rating agencies did not declare the bad quality of these mortgages, leading to more people buying in the bad mortgages while they believed they were safe. When the housing bubble broke, all the bad mortgages and other derivatives could not be paid off, and this caused a huge effect to the whole world. The crisis forced many banks to file for bankruptcy, and the unemployment rate increased noticeably in a number of nations. The Dodd-Frank Wall Street Reform and Consumer Protection Act and the establishment of a capital adequacy ratio for banks to assure their safety are only two of the steps governments have taken to ensure that the crisis doesn't happen again. As can be seen, people today place a high value on understanding the 2008 financial crisis, and a thorough investigation can aid in preventing a similar catastrophe.