Financial Crisis 2008

Financial Crisis 2008

Gary Ingram

DeVry Institute of Technology

Long Island City NY

Instructor: Khoukhi Mohand

ECON312 ACC_N Khoukhi DV NY Principles of Economics

Summer Session B - September 2008

Submitted October 8, 2008

TABLE OF CONTENTS

Page No.

I. What some economist are saying caused the Problem 6

II. Fannie and Freddie 7

III. Greed of the Markets 11

IV. Targeting minorities 14

V. Fitch Ratings, Moody’s Investors, and Standard & Poor’s 14

VI. FANNIE MAE & FREDDIE MAC 15

VII. US Housing Crash 16

VIII. Federal Bailout 20

IX. Conclusion 20

Credible research information was gathered via internet sites such as CNN, Investopedia a Forbes Digital Company, NY Times sites to name a few. Additional information was gathered from radio and CNN documentaries as we followed the events of the Economic Bailout Package..

During the summer of 2006, my wife and I were searching for another house in the area of central New Jersey. All of the houses that were fairly new were approximately $450,000.00 and the older houses were $300,000.00. My wife and I make a pretty good salary, but I thought that the price of the houses were too high. I said to my wife in 2006, how can people afford these home prices, everyone is not a doctor, lawyer or pilot? Well, I finally received my answer…..they can’t.

I. What some economist are saying caused the Problem

One of the key financial developments of the 1990s was the emergence and rapid growth of subprime mortgage lending. Because of regulatory changes, the desire for increased profits, significant technological innovations, and liberalization in some government mortgage support programs, lending institutions began extending credit to millions of borrowers who previously would have been denied credit, both for mortgages and for other consumer loans. The increased availability of subprime mortgage credit has created new opportunities for homeownership and has allowed previously...