🏡⬇ Housing Bubble and the Great Recession | 2008 Financial Crisis financial crisis 2008

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2008 Financial Crisis (The Great Recession) was initiated by bursting of the housing bubble. But why there was a housing bubble in the first place? What was the root cause of the crisis of credit? What was the government response?
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25 comments

AdmiralYoshi ―よっしー提督― 26/09/2021 - 8:49 PM

Wow, what a great informative video. It helps me study a lot, but it also makes me feel awkward because many people still blame free market despite the fact.

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Friendly Dodge 26/09/2021 - 8:49 PM

Thanks socialism and neoliberalism for many messes.

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David Frykenberg 26/09/2021 - 8:49 PM

The CRA was enacted in 1977 to combat redlining and other blatant discriminatory practices… Yeah, I'm not buying the argument that 30 years later banks were suddenly "afraid not to offer loans to 'high risk minorities.'" From the Federal Reserve (granted, a govt institution): "First, these commitments generally lack any enforcement mechanism and, to a large extent, may not represent increased lending or, surprisingly, even consist of CRA-targeted loans. For example, a Citigroup managing director testified to the FCIC that most CRA commitments "would have been fulfilled in the normal course of business" (FCIC, 2011, p. 99). The FCIC report also found that less than 1/4 of the loans pledged in the largest-ever CRA commitment ($800 billion by JPMorgan Chase) were to the lower-income borrowers and neighborhoods targeted by the CRA (FCIC, 2011, p. 97). https://www.federalreserve.gov/econresdata/notes/feds-notes/2015/assessing-the-community-reinvestment-acts-role-in-the-financial-crisis-20150526.html

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Zina O'Sullivan 26/09/2021 - 8:49 PM

Im a little concerned with the placement of blame on efforts to undo years of discriminatory policies of banks which refused to grant loans to minorities. The redlining and refusal of banks to grant loans to minorities was racist and the videos focus on trying to undo these policies (while insinuating that minorities are the only people who sought loans they could not pay back) is shaky at best. It was really lower white middle class that were the main recipients of these mortgages that they could not pay back. Lets place the blame on the financial institutions that prevented the equal distribution of mortgages and not on efforts to overturn racist policies.

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Vianka Angel 26/09/2021 - 8:49 PM

incredibly biased take. if you are going to put your own political opinions into an "educational video" make sure to say it in the title. this was 50% facts and 50% your opinion about the economy, label it that way

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Duhizy 26/09/2021 - 8:49 PM

Most of what you said is true, but you overestimate the impact of the Community Reinvestment Act as a trigger for the crisis. The Act stipulated that they weren't to make bad loans, and it doesn't explain the fact that many of the unregulated actors gorged themselves on the sub-prime market, often to the excess of banks effected by the CRA. Private lenders had an incestuous relationship with the ratings agencies that allowed them to secure the highest ratings for even the most sub-prime trash debt, which fueled the continued demand for crap MBSies as both the lenders and investors had no incentive to stop. It was, in fact, perverse market incentives which caused the crash, and moral hazard with Fannie/Freddie which exacerbated it (although they were also duped by the ratings). Fannie/Freddie should be completely privatized and the ratings agencies should be state-run to prevent conflicts of interest.

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HG51 26/09/2021 - 8:49 PM

Very informative video, one of the best for sure! Thanks

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John Wayne 26/09/2021 - 8:49 PM

6:38 there's a recording of Andrew Cuomo admitting that despite his intentions for raising home ownership rates for minorities, they would also see a higher bankruptcy rate… He was head of Housing and Urban Development in 1997 when they put this affirmative action policy.

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mkb 26/09/2021 - 8:49 PM

The model of Iceland: They let their banks to crash. Now their economy is much better.

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TheFreePantheist 26/09/2021 - 8:49 PM

thanks for dispelling the Keynesian myth. It kills me our great and "free" markets are built on fraud and usury

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Karl Krentzel 26/09/2021 - 8:49 PM

Just here for a refresher.. #Coronavirus

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Ilham 26/09/2021 - 8:49 PM

it is true that greed is the cause of great recession. u know greed people make lower interest rate regulation lure people to make stupid decision in buying home.

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DV Blg 26/09/2021 - 8:49 PM

Came here after watching the movie The Big Short. This was so informative. Thank you!

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Victor B 26/09/2021 - 8:49 PM

Incredibly flawed and manipulative of reality …anarcho-capitalism propaganda. The truth is not that complicated https://youtu.be/0yZ5mjbB11I

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John K 26/09/2021 - 8:49 PM

18:40 in 2020 March the history repeats itself

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Flux Capacitor 26/09/2021 - 8:49 PM

The high cost of housing is the driving factor for sending jobs out of the country.

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quincey carpenter 26/09/2021 - 8:49 PM

white collar crime

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Duhizy 26/09/2021 - 8:49 PM

I agree with everything stated other than your concerns with CRA , which is something that is more up for debate. When isolated, the effect of the CRA isn't as large as you would think that it was, most of the risky loans made by institutions that caused the crash were not required by the CRA, or were made by loaners not covered by the regulation's umbrella. Moreover, the default rate on CRA-backed loans weren't significantly worse than the average loan, and there wasnt much evidence that it influenced the profitability of banks.

The CRA was successful in its goal of countering redlining, which included discrimination against people of color with both high incomes and low, so there was room to make good loans under the CRA requirements. It explicitly stipulated that loans made under the guidelines were to remain profitable, and that there was no obligation to take losses.

If we are looking for the true culprit of the crash, it has to be the state-backed Fannie/Freddie. A private firm wouldn't securatize such risky loans, or at least there wouldnt be an assumed AAA rating.

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Meme Technologies 26/09/2021 - 8:49 PM

Alan Greenspan should have known better since he's an Austrian Economist. It proves that the notion that "power corrupts, and absolute power corrupts absolutely".

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Daniel Cooper 26/09/2021 - 8:49 PM

If you wanted to look smart, mission accomplished. If you wanted to teach, you failed – try harder – I genuinely want to understand.

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availablehage 26/09/2021 - 8:49 PM

Why is that the middle class always suffer

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Truth Seeker 26/09/2021 - 8:49 PM

This lead to the greatest transfer of wealth from the black community since slavery.

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LONG LIVE LIBERTY 26/09/2021 - 8:49 PM

Thanks for going to the root cause as opposed to just blaming greed

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