The Real Reasons for the Global Financial Crisis 2008
A common explanation that has been put forth about the real cause of the ongoing Global Financial Crisis that started in 2008 is the subprime mortgage lending. When significant number of those borrowers failed to meet their commitments, the lenders tried a recovery through selling of these mortgaged properties leading to a slump in the property market and subsequently assuring future recoveries to log losses and so on. The problem would have had a limited impact but for bold and beautiful tool of securitization (1). Use of securitization had multiplied the money available to lend many-fold and that was the reason why liberal subprime lending had become possible. The extensive use of securitization allowed the lenders to make hay because of untested optimism and lack of appropriate disclosure requirements.