🕷️ Crawler Inspector

URL Lookup

Direct Parameter Lookup

Raw Queries and Responses

1. Shard Calculation

Query:

Response:

Calculated Shard: 148 (from laksa125)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical, ml_categories_json AS ml_categories_json, ml_types_json AS ml_types_json, ml_intent_types_json AS ml_intent_types_json, meta_language AS meta_language, attrs_author AS attrs_author, ifNull(toUnixTimestamp(attrs_publish_time), 0) AS attrs_publish_time, ifNull(toUnixTimestamp(attrs_original_publish_time), 0) AS attrs_original_publish_time, ifNull(attrs_is_republished, 0) AS attrs_is_republished, ifNull(attrs_nr_words, 0) AS attrs_nr_words, ifNull(attrs_boilerpipe_nr_words, 0) AS attrs_boilerpipe_nr_words, ifNull(body_ext_links_number, 0) AS body_ext_links_number, ifNull(body_int_links_number, 0) AS body_int_links_number, ifNull(meta_nofollow, 0) AS meta_nofollow, ifNull(meta_noarchive, 0) AS meta_noarchive, ifNull(props_was_rendered, 0) AS props_was_rendered, ifNull(src_redirect, \'\') AS src_redirect, ifNull(download_time_msec, 0) AS download_time_msec, ifNull(download_ttfb_msec, 0) AS download_ttfb_msec, ifNull(download_size, 0) AS download_size FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp","crawl_time":1777053921,"first_indexed_time":1510779977,"http_code":200,"src_unparsed":"com,investopedia!www,\/articles\/economics\/09\/subprime-market-2008.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"Unraveling the 2008 Stock Market Crash: Causes and Aftermath","meta_descriptions":["Learn how risky financial practices led to the 2008 stock market crash, reshaping U.S. financial markets and impacting global economies. Learn about the reforms that followed."],"attrs_boilerpipe_text":"Key Takeaways\nThe 2008 financial crisis was driven by risky mortgage lending, complex financial instruments like MBS, and inadequate regulation.\nCredit default swaps (CDS) exacerbated the crisis, as these unregulated financial products failed in the collapsing housing market.\nThe crisis resulted in the Dodd-Frank Act, aimed at increasing regulation and preventing future financial collapses.\nU.S. economic devastation included a $16 trillion loss in household net worth and unprecedented reforms.\nDespite safeguards, markets face risks from new financial products like derivatives and shadow banking systems.\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\nThe 2008 financial crisis was primarily triggered by the collapse of the housing bubble, leading to the worst economic downturn since the Great Depression. The crisis began years earlier as risky financial practices grew unchecked, creating a housing bubble that eventually burst, causing billions in global economic losses. Key factors included subprime mortgage lending, risky financial products, and regulatory failures. \nMany Americans recall watching in horror as the Dow Jones Industrial Average plummeted nearly 780 points in a single day in October of that year, then its biggest one-day drop in history. The seeds of the crisis would cost the global economy more than $2 trillion of economic growth.\nKey Factors Leading to the 2008 Stock Market Collapse\nThe story of the 2008 stock market crash is more than just numbers on a screen or complex financial instruments. It's about homeowners who lost everything when their\nadjustable-rate mortgages\nsuddenly jumped beyond what they could afford, retirees who had their life savings cut in half, and workers who lost jobs as businesses shuttered in the subsequent\nGreat Recession\n. Understanding how this crisis unfolded isn't just about learning history—it's about recognizing warning signs that could prevent future financial disasters.\nHere’s a breakdown of the main factors behind the crash.\n1. The Housing Bubble and the Role of Subprime Mortgages\nThe crisis began with a housing bubble, fueled by years of ultra-low interest rates and an increased availability of mortgages. Financial institutions offered “subprime” mortgages to people with low creditworthiness, often with little or no income verification. These high-risk loans, initially affordable because of low introductory rates, became unmanageable when interest rates adjusted upward, causing many borrowers to default.\nThroughout the 1990s and early 2000s, the government encouraged homeownership and supported policies that enabled lenders to offer mortgages to more people, including those with low credit scores. Policies like the\nCommunity Reinvestment Act\n(1977) were often blamed for the crisis, but it’s more accurate to say that the private sector took these policies and ran with them by loosening credit standards and pursuing aggressive lending practices to profit from and prop up the housing boom.\n1\n2\n2. Securitization: The Impact of Mortgage-Backed Securities\nFinancial institutions pooled these risky subprime loans into\nmortgage-backed securities (MBS)\nand sold them to investors worldwide. MBSs were complex financial products that appeared to offer high returns with low risk, because of the presumed diversification of underlying assets. However, as housing prices fell and defaults increased, the value of these securities plummeted, creating a ripple effect across the financial system.\n3. Credit Default Swaps: Risks and Derivatives\nTo further “protect” against potential losses on MBS, banks and investors turned to credit default swaps, a form of insurance on these securities. Thus, another popular investment vehicle during this period became a credit derivative, the\ncredit default swap (CDS)\n.\nCDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was largely unregulated. This meant that there was no requirement that the issuers of CDS contracts maintain enough money in their reserves to pay out under a worst-case scenario (such as an economic downturn). In early 2008, this spelled potential disaster for American International Group, Inc. (AIG), one of the nation's leading financial companies, when it couldn't meet claims and announced huge losses in its portfolio of underwritten CDS contracts.\n3\n4\n4. The Dangers of Adjustable-Rate Mortgages\nAmong the most potentially harmful of the mortgages offered to subprime borrowers were the\ninterest-only ARM\nand the payment option ARM. Both were adjustable-rate mortgages. These mortgages allow the borrower to make much lower initial payments than would be due under a fixed-rate mortgage. After a period of time, often only two or three years, these ARMs reset, often at higher rates. The payments then fluctuate as frequently as monthly, sometimes resulting in much larger payments than those the borrower paid initially.\nIn the up-trending market (and growing housing bubble) that existed in the early 2000s, these mortgages were thought to be virtually risk-free. Borrowers could end up with positive equity despite their low mortgage payments because their homes had increased in value since the purchase date. If they couldn't afford the higher payments after their mortgage rates reset, they could simply sell the homes for a profit.\n5. Escalating Consumer Debt: A Crisis Catalyst\nTo compound the potential mortgage risk, total\nconsumer debt\n, in general, continued to grow at an astonishing rate. In 2004, consumer debt hit $2 trillion for the first time, meaning it doubled in less than 10 years.\n5\n6. How Regulatory Oversight Changes Fueled the Crisis\nThe years leading up to the 2008 financial crisis were marked by significant regulatory and legal changes that reduced oversight and fueled risk-taking in the financial industry. Here are some key changes from the 1980s through the early 2000s that helped set the stage for the crisis:\n1982:\nThe Garn-St. Germain Depository Institutions Act\nThis act deregulated the savings and loan industry, allowing institutions to expand into new types of lending, such as adjustable-rate mortgages. It was intended to help struggling banks but led to riskier lending practices. The act is sometimes credited with setting a precedent for financial deregulation that would continue through the 1980s and beyond.\n1994: The Riegle-Neal Interstate Banking and Branching Efficiency Act\nThis act removed barriers for banks to operate across state lines, facilitating the growth of large, national banks. While this helped banks diversify, it also contributed to the consolidation of banking power, allowing institutions to become “\ntoo big to fail\n” and increasing systemic risk across the financial system.\n1999: The Gramm-Leach-Bliley Act (GLBA)\nGLBA\n, also known as the Financial Services Modernization Act, repealed major parts of the Glass-Steagall Act of 1933, which had previously separated commercial banking from investment banking. By allowing banks to merge with securities and insurance companies, GLBA paved the way for “universal banks” that engaged in a wide range of financial services, including risky investments. This increase in complexity and interconnectedness heightened the risk of a widespread financial collapse.\n2000: The Commodity Futures Modernization Act (CFMA)\nThe\nCFMA\nremoved many regulations from derivatives trading, including credit default swaps (CDS), a key factor in the 2008 financial crisis. By exempting CDS and other complex derivatives from regulation, the act allowed institutions to take on massive risks, which compounded losses when defaults on subprime loans increased. The lack of oversight meant that companies like AIG could issue large amounts of CDS with minimal capital reserves to cover potential losses.\nShift to “Light-Touch” Regulation in the 2000s\nThe 2000s were marked by an overall shift toward “light-touch” regulation, especially within agencies like the SEC. The focus was on allowing financial markets to self-regulate and emphasizing innovation over caution. This attitude led to minimal oversight of mortgage-backed securities and\ncollateralized debt obligations (CDOs)\nthat bundled subprime loans, which ultimately proliferated risk throughout the system.\n2004: SEC’s Net Capital Rule Change\nIn 2004, the\nSecurities and Exchange Commission (SEC)\nallowed major investment banks to increase their leverage ratios significantly, meaning they could borrow much more relative to their capital. Previously, banks had been limited to a leverage ratio of 12 to one, but the new rule allowed ratios as high as 30 to one or even 40 to one.\n6\nThis change enabled banks to take on enormous risks by financing long-term assets with short-term debt, increasing their vulnerability to any market downturn.\n7\n8\n7. Fannie Mae and Freddie Mac's Involvement\nIn the wake of the crash, many of those who backed the deregulatory efforts of the previous years were intent on blaming two government-sponsored enterprises, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), for the crisis.\n9\n10\n11\nHere’s a look at their involvement and why they’re often mentioned in discussions about the crash:\nRole in the Housing Market\nFannie Mae and Freddie Mac were created to promote homeownership by buying mortgages from lenders, packaging them into securities, and selling them to investors. This helped lenders free up capital to issue more loans, thus increasing homeownership. By the 2000s, both entities were heavily involved in purchasing mortgages, including riskier subprime loans, from the private market.\nIncreased Risk-Taking in the Early 2000s\nUnder pressure from both political and market forces to expand homeownership, Fannie and Freddie increasingly purchased subprime and\nalt-A loans\n(those with limited documentation or low credit quality). Although they initially held stricter underwriting standards than private lenders, Fannie and Freddie relaxed their criteria to compete with private institutions benefiting from the booming housing market.\nSecuritization of Risky Mortgages\nLike private banks, Fannie and Freddie pooled mortgages into mortgage-backed securities and sold them to investors. While they maintained guarantees on some of these securities, they held significant exposure to the housing market. When housing prices fell, and foreclosures surged, Fannie and Freddie suffered substantial losses, needing a federal bailout in 2008 to prevent collapse. Their financial distress contributed to the crisis’s depth but did not initiate it.\nPrivate Market Influence\nMuch of the riskiest lending during the housing bubble came from private lenders who issued subprime mortgages with even lower standards than those of Fannie and Freddie. These private institutions created their own MBSs, often without the oversight or implied government backing that Fannie and Freddie had. This private-market securitization, which exploded in the early 2000s, exposed the financial system to unmanageable levels of risk and was a core driver of the crisis.\nSystemic Impact, Not Direct Cause\nFannie and Freddie were caught in the wave of broader housing market speculation and lending practices but didn’t drive the most extreme forms of subprime lending. Buying riskier loans contributed to inflating the housing bubble and increasing overall exposure to the housing market’s downturn, which worsened the crisis when it arrived. However, private lenders and Wall Street banks were primarily responsible for the riskiest practices and highest volumes of subprime loans.\n8. The Collapse of Wall Street Giants\nThe most proximate cause (the last domino to fall, as it were) of the crisis was the collapse of storied institutions at the heart of Wall Street. As mortgage defaults rose, financial giants holding large amounts of MBS, such as Lehman Brothers, faced mounting losses and liquidity crises. Lehman’s bankruptcy in 2008 triggered widespread panic, as it demonstrated that even major institutions could collapse. This eroded investor confidence globally, froze credit markets, and led to widespread economic distress.\n$150 billion\nThe amount of\nbailout money AIG received\nfrom the U.S. federal government in 2008, which the company repaid with interest by 2013.\n3\nTimeline of the 2008 Stock Market Crash\nApril 2, 2007: Major Subprime Lender Goes Under\nNew Century Financial Corporation, a leading subprime mortgage lender, files for bankruptcy.\n12\nJuly 31, 2007: Bear Stearns Files for Bankruptcy\nBear Stearns goes under\n, drowned in a sea of massive losses resulting from underwriting many of the investment vehicles linked to the subprime mortgage market.\n13\n14\nOct. 9, 2007: Stock Market Peak\nIt was soon obvious to all that the market was in trouble, and a subprime mortgage crisis was looming. Homeowners defaulted at high rates as the creative variations of subprime mortgages reset to higher payments as home prices declined.\nMany homeowners reported being \"upside down\"—they owed more on their mortgages than their homes were worth—and could no longer flip them to make themselves whole. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. The\nsubprime meltdown\nwas taking its toll on homeowners and the real estate market.\nDespite this apparent mess, the financial markets continued higher into October 2007, with the Dow reaching a closing high of 14,164 on Oct. 9.\nDecember 2007: U.S. Enters Recession\nThe turmoil eventually caught up, and by December 2007 the United States had fallen into a\nrecession\n. Officially declared later, the U.S. economy was on the precipice as consumer spending fell, debts were being defaulted on, and unemployment was rising.\nMarch 2008: Bear Stearns Acquired by JPMorgan Chase\nIn a government-brokered deal,\nBear Stearns is sold\nto JPMorgan & Chase & Co. (\nJPM\n) for a fraction of its former value. The U.S. Federal Reserve\n15\nstepped in with emergency funding to ensure the deal closed, aiming to prevent wider panic.\nJuly 2008: IndyMac Bank Fails\nBy early July 2008, the Dow Jones Industrial Average would trade below 11,000 for the first time in over two years.\n16\nThat would not be the end of the decline.\nIndyMac, a major mortgage lender, collapses under the weight of loan defaults. Its failure becomes one of the largest bank failures in U.S. history, prompting intervention by the Federal Deposit Insurance Corporation (FDIC).\n15\nIt won't be the last lender to collapse.\nFast Fact\nMany borrowers who obtained adjustable-rate subprime mortgages with low initial rates received no information from lenders about the details of such loans and found themselves trapped with unaffordable loan obligations when rates rose.\n17\nSept. 6, 2008: Federal Takeover of Fannie Mae and Freddie Mac\nWith the financial markets down almost 20% from their October 2007 peaks, the government announces its\ntakeover of Fannie Mae and Freddie Mac\n. This was a necessary step because of losses from heavy exposure to the collapsing subprime mortgage market.\n18\nNewly former employees of the bankrupt Lehman Brothers hug outside its offices in Manhattan, New York, Sept. 15, 2018.\nNicholas Roberts \/ Getty Images\nSept. 15, 2008: Lehman Brothers Declares Bankruptcy\nOne week later, major investment banking firm\nLehman Brothers\nsuccumbed to its overexposure to the subprime mortgage market. It announced the largest bankruptcy filing in U.S. history at that time.\n19\n20\nThe next day, markets plummeted, and the Dow closed down 499 points at 10,917.\nSept. 16, 2008: The \"\nBuck Breaks\n,\n\" AIG Receives Bailout, Panic Spreads, the Fed Lowers Fed Funds Rate\nThings now begin moving very quickly. The collapse of Lehman caused the net asset value (\nNAV\n) of the Reserve Primary Fund to fall below $1 per share on Sept. 16, 2008. Investors were told that for every $1 invested, they were entitled to 97 cents. Given the staggering losses all around, this might appear insignificant—far from it.\nThe Reserve Primary Fund was a prominent money market fund, one of the oldest in the U.S. and long considered a stable, low-risk investment vehicle. Money market funds like the Reserve Primary Fund are typically seen as safe places to park cash, as they invest in high-quality, short-term debt such as commercial paper. They aim to maintain a stable NAV of $1 per share, giving investors predictable returns with minimal risk.\nHowever, the Reserve Primary Fund had invested in commercial paper issued by Lehman Brothers, a financial giant with significant exposure to subprime mortgage assets. When Lehman Brothers declared bankruptcy, the value of its commercial paper held by the Reserve Primary Fund suddenly dropped to near zero. This was the first time since the 1994 failure of a small money market fund that a major fund had “broken the buck.”\nBreaking the buck sent shock waves through the financial system. Money market funds were widely used by individuals, institutions, and corporations as a safe place for short-term cash. The loss of stability in such a trusted asset class caused immediate panic, leading investors to redeem their holdings en masse across the industry, fearing similar losses in other funds.\nPanic breaks out in the\nmoney market\nfund industry, resulting in massive redemption requests. The same day, Bank of America (\nBAC\n) announced it was buying Merrill Lynch, the nation's largest brokerage company.\n20\nIn addition, the credit rating for AIG is downgraded because of the credit derivative contracts they'd underwritten. AIG, facing insolvency because of losses on credit default swaps, receives an $85 billion government bailout to prevent further destabilization of the financial system.\n21\nFinally, on this busy day, the U.S. Federal Reserve announces it would maintain its federal funds rate at 2.0%.\n22\nSept. 17, 2008: SEC Bans Short Selling on Financial Sector Firms\nThe SEC initiates a temporary ban on\nshort selling\nfinancial company stocks to help stabilize the markets.\n23\nThe markets surged on the news, and investors sent the Dow up 456 points to an intraday high of 11,483, closing up 361 at 11,388.\nSept. 18, 2008: Bailout Talks Begin\nTreasury Secretary Henry Paulson proposes the Troubled Asset Relief Program (\nTARP\n) to buy up to $700 billion in toxic assets from banks to stabilize the financial sector. The news sends the Dow up 410 points.\n24\n25\nFor investors, those highs will be like the last gasp of air when a roller coaster climbs to its greatest height and is about to drop.\n21\nA protestor stands outside Bear Stearns headquarters March 26, 2008, in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank.\nChris Hondros \/ Getty Images\nSept. 19, 2008: The U.S. Treasury Announces a Temporary Guarantee for Money Market Funds\nIn response to Reserve Primary Fund breaking the buck, the U.S. government quickly took steps to stabilize money markets, aiming to restore investor confidence and prevent further runs on these funds.\nSept. 21, 2008: GS and MS Shift to Holding Companies\nGoldman Sachs Inc. (\nGS\n) and Morgan Stanley (\nMS\n), the last two of the major\ninvestment banks\nstill standing, converted from investment banks to bank\nholding companies\nto be able to obtain bailout funding.\n26\nSept. 25, 2008: Washington Mutual Fails\nAfter a 10-day\nbank run\n, the\nFDIC\nseizes Washington Mutual, then the nation's largest savings and loan and one heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase.\n27\nSept. 29, 2008: Massive Market Decline\nThe Dow declined 774 points (6.98%), at the time the largest one-day point drop in history.\n28\nOct. 3, 2008: TARP Passes\nA reworked $700 billion TARP plan, renamed the\nEmergency Economic Stabilization Act of 2008\n, passed with a bipartisan vote in Congress.\n29\nOct. 6-10\n:\nMarket Collapse Continues\nThe Dow continues to tumble, closing below 10,000 for the first time in years. By Oct. 10, it would bottom at 7,882, reflecting severe investor uncertainty and panic.\nU.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders were hastily gathered at the summit to address the 2008 financial crisis.\nMatthew Cavanaugh \/ Getty Images\nLate 2008 – Early 2009: Federal Reserve Lowers Interest Rates to Near Zero\nTo stimulate the economy, the Federal Reserve reduces interest rates, aiming to improve borrowing conditions for businesses and individuals.\n0.16%\nThe U.S. Federal Reserve's key interest rate was 5.26% in mid-2007. By the end of 2008, it was 0.16%.\n30\nMarch 2009: Market Bottoms Out\nThe S&P 500 reaches its lowest point at 676.53. This signals the lowest point of the crisis, with gradual recovery beginning thereafter because of government intervention and market adjustments.\n2009-2010: Dodd-Frank Wall Street Reform and Consumer Protection Act\nA series of post-crisis regulatory reforms begins. The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced to overhaul financial regulation, aimed to reduce risks in the financial system, increase transparency, and protect consumers from unfair lending practices.\nLong-Term Impacts of the 2008 Crisis\nThe 2008 financial crisis didn't just disappear when the stock market finally hit bottom. Its effects rippled through the American economy for years, fundamentally changing how banks operate, how homes are bought and sold, and how the government regulates Wall Street.\nThe human toll was staggering. According to data from the U.S. Federal Reserve, by 2010, over 8.7 million American jobs had vanished. Nearly 10 million families lost their homes to foreclosure. The average U.S. household lost about $30,000 in home value and $70,000 in stock wealth. The unemployment rate peaked at 10% in October 2009, and many workers who lost jobs during this period never fully recovered their earning potential.\n31\n32\n33\nThe government's response reshaped the financial industry. Dodd-Frank introduced the most sweeping changes to financial regulation since the Great Depression. The law created the Consumer Financial Protection Bureau to guard against predatory lending practices, required banks to maintain larger cash reserves, and implemented the \"\nVolcker Rule\n,\" limiting banks' ability to make risky investments with customer deposits.\nBanks now face stricter oversight and must undergo regular \"stress tests\" to prove they could survive economic shocks. Mortgage lenders must verify borrowers' ability to repay loans. However, new financial innovations and the continued growth of \"\nshadow banking\n\"—financial services provided by nonbank institutions—suggest that while the next crisis might not look exactly like 2008, the potential for financial instability remains.\nWhat Caused the Financial Crisis of 2008?\nThe growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of \"toxic\" assets, the collapse of home prices, and more contributed to the financial crisis of 2008.\nHow Much Did Housing Prices Drop in 2008?\nFrom July 2006 to January 2009, the national median house price dropped by 29%.\n34\nHow Long Did the 2008 Housing Market Crisis Last?\nDifferent geographic areas recovered at different speeds. However, in general, the recovery began in 2011, more than three years after the housing crisis began. Home prices had fully recovered by 2012.\n35\nThe Bottom Line \nThe 2008 financial crisis serves as a stark reminder that financial innovation without proper oversight can have devastating consequences. What began with a housing bubble and risky mortgage lending practices escalated into a global financial meltdown through complex financial products and inadequate regulation.\nWhile new safeguards and regulations make an exact repeat of 2008 less likely, the crisis offers enduring lessons about the dangers of excessive risk-taking, the importance of transparency in financial markets, and the interconnected nature of global finance. Perhaps most importantly, it demonstrates how problems in seemingly isolated market segments can quickly spread to threaten the entire financial system, affecting everyone from Wall Street bankers to Main Street homeowners.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Live](https:\/\/www.investopedia.com\/stock-market-today-dow-jones-s-and-p-500-04242026-11957748)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - [Economy](https:\/\/www.investopedia.com\/economic-news-5218422)\n  - [Government](https:\/\/www.investopedia.com\/political-news-4689737)\n  - [Crypto](https:\/\/www.investopedia.com\/cryptocurrency-news-5114163)\n  - [Live Markets News](https:\/\/www.investopedia.com\/live-markets-news-11713202)\n  - [Personal Finance](https:\/\/www.investopedia.com\/personal-finance-news-5114159)\n  - [View All](https:\/\/www.investopedia.com\/news-4427706)\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n  Investing\n  \n  - [Stocks](https:\/\/www.investopedia.com\/stocks-4427785)\n  - [Cryptocurrency](https:\/\/www.investopedia.com\/cryptocurrency-4427699)\n  - [Bonds](https:\/\/www.investopedia.com\/bonds-4689778)\n  - [ETFs](https:\/\/www.investopedia.com\/etfs-4427784)\n  - [Options and Derivatives](https:\/\/www.investopedia.com\/options-and-derivatives-trading-4689663)\n  - [Commodities](https:\/\/www.investopedia.com\/commodities-4427780)\n  - [Trading](https:\/\/www.investopedia.com\/trading-4427765)\n  - [Automated Investing](https:\/\/www.investopedia.com\/financial-technology-and-automated-investing-4689759)\n  - [Brokers](https:\/\/www.investopedia.com\/brokers-4689772)\n  - [Fundamental Analysis](https:\/\/www.investopedia.com\/fundamental-analysis-4689757)\n  - [View All](https:\/\/www.investopedia.com\/investing-4427685)\n- [Simulator](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n  Simulator\n  \n  - [Login \/ Portfolio](https:\/\/www.investopedia.com\/simulator\/portfolio)\n  - [Trade](https:\/\/www.investopedia.com\/simulator\/trade\/stocks)\n  - [Research](https:\/\/www.investopedia.com\/simulator\/research)\n  - [My Games](https:\/\/www.investopedia.com\/simulator\/games\/my-games)\n  - [Leaderboard](https:\/\/www.investopedia.com\/simulator\/games)\n- [Banking](https:\/\/www.investopedia.com\/banking-4427754)\n  Banking\n  \n  - [Savings Accounts](https:\/\/www.investopedia.com\/savings-accounts-4689728)\n  - [Certificates of Deposit (CDs)](https:\/\/www.investopedia.com\/certificate-of-deposits-4689733)\n  - [Money Market Accounts](https:\/\/www.investopedia.com\/money-market-account-4689730)\n  - [Checking Accounts](https:\/\/www.investopedia.com\/checking-accounts-4689732)\n  - [View All](https:\/\/www.investopedia.com\/banking-4427754)\n- [Personal Finance](https:\/\/www.investopedia.com\/personal-finance-4427760)\n  Personal Finance\n  \n  - [Budgeting and Saving](https:\/\/www.investopedia.com\/budgeting-and-savings-4427755)\n  - [Personal Loans](https:\/\/www.investopedia.com\/personal-loans-4689729)\n  - [Insurance](https:\/\/www.investopedia.com\/insurance-4427716)\n  - [Mortgages](https:\/\/www.investopedia.com\/mortgage-4689703)\n  - [Credit and Debt](https:\/\/www.investopedia.com\/credit-and-debt-4689724)\n  - [Student Loans](https:\/\/www.investopedia.com\/student-loans-4689727)\n  - [Taxes](https:\/\/www.investopedia.com\/taxes-4427724)\n  - [Credit Cards](https:\/\/www.investopedia.com\/credit-card-4689721)\n  - [Financial Literacy](https:\/\/www.investopedia.com\/financial-literacy-resource-center-7151950)\n  - [Retirement](https:\/\/www.investopedia.com\/retirement-planning-4689695)\n  - [View All](https:\/\/www.investopedia.com\/personal-finance-4427760)\n- [Economy](https:\/\/www.investopedia.com\/economy-4689801)\n  Economy\n  \n  - [Government and Policy](https:\/\/www.investopedia.com\/government-and-policy-4689793)\n  - [Monetary Policy](https:\/\/www.investopedia.com\/monetary-policy-4689792)\n  - [Fiscal Policy](https:\/\/www.investopedia.com\/fiscal-policy-4689796)\n  - [Economics](https:\/\/www.investopedia.com\/economics-4689800)\n  - [View All](https:\/\/www.investopedia.com\/economy-4689801)\n- [Reviews](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n  Reviews\n  \n  - [Best Online Brokers](https:\/\/www.investopedia.com\/best-online-brokers-4587872)\n  - [Best Crypto Exchanges](https:\/\/www.investopedia.com\/best-crypto-exchanges-5071855)\n  - [Best Savings Rates](https:\/\/www.investopedia.com\/high-yield-savings-accounts-4770633)\n  - [Best CD Rates](https:\/\/www.investopedia.com\/best-cd-rates-4770214)\n  - [Best Life Insurance](https:\/\/www.investopedia.com\/the-best-life-insurance-companies-8763666)\n  - [Best Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5094943)\n  - [Best Robo-Advisors](https:\/\/www.investopedia.com\/the-best-robo-advisors-8764849)\n  - [Best Personal Loans](https:\/\/www.investopedia.com\/the-best-personal-loans-8761582)\n  - [Best Debt Relief Companies](https:\/\/www.investopedia.com\/the-best-debt-relief-companies-8763179)\n  - [View All](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n\n- [Newsletters](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp)\n\nFollow Us\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - [Economy](https:\/\/www.investopedia.com\/economic-news-5218422)\n  - [Government](https:\/\/www.investopedia.com\/political-news-4689737)\n  - [Crypto](https:\/\/www.investopedia.com\/cryptocurrency-news-5114163)\n  - [Live Markets News](https:\/\/www.investopedia.com\/live-markets-news-11713202)\n  - [Personal Finance](https:\/\/www.investopedia.com\/personal-finance-news-5114159)\n  - [View All](https:\/\/www.investopedia.com\/news-4427706)\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n  - [Stocks](https:\/\/www.investopedia.com\/stocks-4427785)\n  - [Cryptocurrency](https:\/\/www.investopedia.com\/cryptocurrency-4427699)\n  - [Bonds](https:\/\/www.investopedia.com\/bonds-4689778)\n  - [ETFs](https:\/\/www.investopedia.com\/etfs-4427784)\n  - [Options and Derivatives](https:\/\/www.investopedia.com\/options-and-derivatives-trading-4689663)\n  - [Commodities](https:\/\/www.investopedia.com\/commodities-4427780)\n  - [Trading](https:\/\/www.investopedia.com\/trading-4427765)\n  - [Automated Investing](https:\/\/www.investopedia.com\/financial-technology-and-automated-investing-4689759)\n  - [Brokers](https:\/\/www.investopedia.com\/brokers-4689772)\n  - [Fundamental Analysis](https:\/\/www.investopedia.com\/fundamental-analysis-4689757)\n  - [View All](https:\/\/www.investopedia.com\/investing-4427685)\n- [Simulator](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n  - [Login \/ Portfolio](https:\/\/www.investopedia.com\/simulator\/portfolio)\n  - [Trade](https:\/\/www.investopedia.com\/simulator\/trade\/stocks)\n  - [Research](https:\/\/www.investopedia.com\/simulator\/research)\n  - [My Games](https:\/\/www.investopedia.com\/simulator\/games\/my-games)\n  - [Leaderboard](https:\/\/www.investopedia.com\/simulator\/games)\n- [Banking](https:\/\/www.investopedia.com\/banking-4427754)\n  - [Savings Accounts](https:\/\/www.investopedia.com\/savings-accounts-4689728)\n  - [Certificates of Deposit (CDs)](https:\/\/www.investopedia.com\/certificate-of-deposits-4689733)\n  - [Money Market Accounts](https:\/\/www.investopedia.com\/money-market-account-4689730)\n  - [Checking Accounts](https:\/\/www.investopedia.com\/checking-accounts-4689732)\n  - [View All](https:\/\/www.investopedia.com\/banking-4427754)\n- [Personal Finance](https:\/\/www.investopedia.com\/personal-finance-4427760)\n  - [Budgeting and Saving](https:\/\/www.investopedia.com\/budgeting-and-savings-4427755)\n  - [Personal Loans](https:\/\/www.investopedia.com\/personal-loans-4689729)\n  - [Insurance](https:\/\/www.investopedia.com\/insurance-4427716)\n  - [Mortgages](https:\/\/www.investopedia.com\/mortgage-4689703)\n  - [Credit and Debt](https:\/\/www.investopedia.com\/credit-and-debt-4689724)\n  - [Student Loans](https:\/\/www.investopedia.com\/student-loans-4689727)\n  - [Taxes](https:\/\/www.investopedia.com\/taxes-4427724)\n  - [Credit Cards](https:\/\/www.investopedia.com\/credit-card-4689721)\n  - [Financial Literacy](https:\/\/www.investopedia.com\/financial-literacy-resource-center-7151950)\n  - [Retirement](https:\/\/www.investopedia.com\/retirement-planning-4689695)\n  - [View All](https:\/\/www.investopedia.com\/personal-finance-4427760)\n- [Economy](https:\/\/www.investopedia.com\/economy-4689801)\n  - [Government and Policy](https:\/\/www.investopedia.com\/government-and-policy-4689793)\n  - [Monetary Policy](https:\/\/www.investopedia.com\/monetary-policy-4689792)\n  - [Fiscal Policy](https:\/\/www.investopedia.com\/fiscal-policy-4689796)\n  - [Economics](https:\/\/www.investopedia.com\/economics-4689800)\n  - [View All](https:\/\/www.investopedia.com\/economy-4689801)\n- [Reviews](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n  - [Best Online Brokers](https:\/\/www.investopedia.com\/best-online-brokers-4587872)\n  - [Best Crypto Exchanges](https:\/\/www.investopedia.com\/best-crypto-exchanges-5071855)\n  - [Best Savings Rates](https:\/\/www.investopedia.com\/high-yield-savings-accounts-4770633)\n  - [Best CD Rates](https:\/\/www.investopedia.com\/best-cd-rates-4770214)\n  - [Best Life Insurance](https:\/\/www.investopedia.com\/the-best-life-insurance-companies-8763666)\n  - [Best Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5094943)\n  - [Best Robo-Advisors](https:\/\/www.investopedia.com\/the-best-robo-advisors-8764849)\n  - [Best Personal Loans](https:\/\/www.investopedia.com\/the-best-personal-loans-8761582)\n  - [Best Debt Relief Companies](https:\/\/www.investopedia.com\/the-best-debt-relief-companies-8763179)\n  - [View All](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n\n- Top Stories\n- [How Much Do Americans Spend in Their 30s?](https:\/\/www.investopedia.com\/how-much-do-americans-spend-in-their-30s-national-data-reveals-key-expenses-driving-household-budgets-11951214)\n- [How the Cost of Living Ranks in Every State](https:\/\/www.investopedia.com\/how-the-cost-of-living-ranks-in-every-state-and-what-drives-the-big-differences-11951215)\n- [What Happens to Your 401(k) When You Die?](https:\/\/www.investopedia.com\/what-happens-to-your-401-k-when-you-die-1776346226965-11951211)\n- [3 Safe Ways to Earn 5% or Better](https:\/\/www.investopedia.com\/dont-let-usd5000-sit-idle-3-safe-ways-to-earn-5-or-better-11957399)\n\nTable of Contents\n\nExpand\n\nTable of Contents\n\n- [Key Factors](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp#toc-key-factors-leading-to-the-2008-stock-market-collapse)\n- [The Timeline](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp#toc-timeline-of-the-2008-stock-market-crash)\n- [Long-Term Impacts](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp#toc-long-term-impacts-of-the-2008-crisis)\n- [FAQs](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp#toc-what-caused-the-financial-crisis-of-2008)\n- [The Bottom Line](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp#toc-the-bottom-line)\n\n# Unraveling the 2008 Stock Market Crash: Causes and Aftermath\nExplore the Causes and Events at the Heart of the Financial Crisis\n\nBy\n\n[Peter Gratton](https:\/\/www.investopedia.com\/peter-gratton-7968386)\n\n![Peter Gratton portrait]()\n\n![Peter Gratton portrait](https:\/\/www.investopedia.com\/thmb\/Tx-Ks42pE2ZOzQzV-QuIWtsDGHw=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/PGphotobestversion-c7f87d2cc1ef41459cf33551c7bd3530.jpg)\n\n[Full Bio](https:\/\/www.investopedia.com\/peter-gratton-7968386)\n\nPeter Gratton, Ph.D., is a New Orleans-based editor and professor with over 20 years of experience in investing, economics, and public policy. Peter began covering markets at Multex (Reuters) and has expanded his coverage to include investments, ethics, public policy, and the health and travel industries.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\nUpdated December 23, 2025\n\nReviewed by [Julius Mansa](https:\/\/www.investopedia.com\/julius-mansa-4799781)\n\nFact checked by\n\n[Vikki Velasquez](https:\/\/www.investopedia.com\/vikki-velasquez-5198872)\n\n![Vikkie Velasquez]()\n\n![Vikkie Velasquez](https:\/\/www.investopedia.com\/thmb\/qsiqwN4603qvBBcEmwBBFAZ7h-8=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg)\n\nFact checked by Vikki Velasquez\n\n[Full Bio](https:\/\/www.investopedia.com\/vikki-velasquez-5198872)\n\nVikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\n![ trader looks on during a trading session on the floor of Frankfurt stock exchange on September 30, 2008 in Frankfurt am Main, Germany.](https:\/\/www.investopedia.com\/thmb\/NaL8i1yZQenUfrM-ucfrpgOsnkk=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-83060834-4a3959904d9948e4a810eed89d2c4ab5.jpg)\n\n![ trader looks on during a trading session on the floor of Frankfurt stock exchange on September 30, 2008 in Frankfurt am Main, Germany.](https:\/\/www.investopedia.com\/thmb\/NaL8i1yZQenUfrM-ucfrpgOsnkk=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-83060834-4a3959904d9948e4a810eed89d2c4ab5.jpg)\n\nRalph Orlowski \/ Getty Images\n\nClose\n\n### Key Takeaways\n- The 2008 financial crisis was driven by risky mortgage lending, complex financial instruments like MBS, and inadequate regulation.\n- Credit default swaps (CDS) exacerbated the crisis, as these unregulated financial products failed in the collapsing housing market.\n- The crisis resulted in the Dodd-Frank Act, aimed at increasing regulation and preventing future financial collapses.\n- U.S. economic devastation included a \\$16 trillion loss in household net worth and unprecedented reforms.\n- Despite safeguards, markets face risks from new financial products like derivatives and shadow banking systems.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nASK\n\nThe 2008 financial crisis was primarily triggered by the collapse of the housing bubble, leading to the worst economic downturn since the Great Depression. The crisis began years earlier as risky financial practices grew unchecked, creating a housing bubble that eventually burst, causing billions in global economic losses. Key factors included subprime mortgage lending, risky financial products, and regulatory failures.\n\nMany Americans recall watching in horror as the Dow Jones Industrial Average plummeted nearly 780 points in a single day in October of that year, then its biggest one-day drop in history. The seeds of the crisis would cost the global economy more than \\$2 trillion of economic growth.\n\n## Key Factors Leading to the 2008 Stock Market Collapse\nThe story of the 2008 stock market crash is more than just numbers on a screen or complex financial instruments. It's about homeowners who lost everything when their [adjustable-rate mortgages](https:\/\/www.investopedia.com\/terms\/a\/arm.asp) suddenly jumped beyond what they could afford, retirees who had their life savings cut in half, and workers who lost jobs as businesses shuttered in the subsequent [Great Recession](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp). Understanding how this crisis unfolded isn't just about learning history—it's about recognizing warning signs that could prevent future financial disasters.\n\nTake the Next Step to Invest\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\nHere’s a breakdown of the main factors behind the crash.\n\n### 1\\. The Housing Bubble and the Role of Subprime Mortgages\nThe crisis began with a housing bubble, fueled by years of ultra-low interest rates and an increased availability of mortgages. Financial institutions offered “subprime” mortgages to people with low creditworthiness, often with little or no income verification. These high-risk loans, initially affordable because of low introductory rates, became unmanageable when interest rates adjusted upward, causing many borrowers to default.\n\nThroughout the 1990s and early 2000s, the government encouraged homeownership and supported policies that enabled lenders to offer mortgages to more people, including those with low credit scores. Policies like the [Community Reinvestment Act](https:\/\/www.investopedia.com\/terms\/c\/community_reinvestment_act.asp) (1977) were often blamed for the crisis, but it’s more accurate to say that the private sector took these policies and ran with them by loosening credit standards and pursuing aggressive lending practices to profit from and prop up the housing boom.12\n\n### 2\\. Securitization: The Impact of Mortgage-Backed Securities\nFinancial institutions pooled these risky subprime loans into [mortgage-backed securities (MBS)](https:\/\/www.investopedia.com\/terms\/m\/mbs.asp) and sold them to investors worldwide. MBSs were complex financial products that appeared to offer high returns with low risk, because of the presumed diversification of underlying assets. However, as housing prices fell and defaults increased, the value of these securities plummeted, creating a ripple effect across the financial system.\n\n### 3\\. Credit Default Swaps: Risks and Derivatives\nTo further “protect” against potential losses on MBS, banks and investors turned to credit default swaps, a form of insurance on these securities. Thus, another popular investment vehicle during this period became a credit derivative, the [credit default swap (CDS)](https:\/\/www.investopedia.com\/terms\/c\/creditdefaultswap.asp).\n\nCDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was largely unregulated. This meant that there was no requirement that the issuers of CDS contracts maintain enough money in their reserves to pay out under a worst-case scenario (such as an economic downturn). In early 2008, this spelled potential disaster for American International Group, Inc. (AIG), one of the nation's leading financial companies, when it couldn't meet claims and announced huge losses in its portfolio of underwritten CDS contracts.34\n\n### 4\\. The Dangers of Adjustable-Rate Mortgages\nAmong the most potentially harmful of the mortgages offered to subprime borrowers were the [interest-only ARM](https:\/\/www.investopedia.com\/terms\/i\/interestonlyarm.asp) and the payment option ARM. Both were adjustable-rate mortgages. These mortgages allow the borrower to make much lower initial payments than would be due under a fixed-rate mortgage. After a period of time, often only two or three years, these ARMs reset, often at higher rates. The payments then fluctuate as frequently as monthly, sometimes resulting in much larger payments than those the borrower paid initially.\n\nIn the up-trending market (and growing housing bubble) that existed in the early 2000s, these mortgages were thought to be virtually risk-free. Borrowers could end up with positive equity despite their low mortgage payments because their homes had increased in value since the purchase date. If they couldn't afford the higher payments after their mortgage rates reset, they could simply sell the homes for a profit.\n\n### 5\\. Escalating Consumer Debt: A Crisis Catalyst\nTo compound the potential mortgage risk, total [consumer debt](https:\/\/www.investopedia.com\/terms\/c\/consumer-debt.asp), in general, continued to grow at an astonishing rate. In 2004, consumer debt hit \\$2 trillion for the first time, meaning it doubled in less than 10 years.5\n\n### 6\\. How Regulatory Oversight Changes Fueled the Crisis\nThe years leading up to the 2008 financial crisis were marked by significant regulatory and legal changes that reduced oversight and fueled risk-taking in the financial industry. Here are some key changes from the 1980s through the early 2000s that helped set the stage for the crisis:\n\n**1982: [The Garn-St. Germain Depository Institutions Act](https:\/\/www.investopedia.com\/terms\/g\/garn-st-germain-depository-institutions-act.asp)**\n\nThis act deregulated the savings and loan industry, allowing institutions to expand into new types of lending, such as adjustable-rate mortgages. It was intended to help struggling banks but led to riskier lending practices. The act is sometimes credited with setting a precedent for financial deregulation that would continue through the 1980s and beyond.\n\n**1994: The Riegle-Neal Interstate Banking and Branching Efficiency Act**\n\nThis act removed barriers for banks to operate across state lines, facilitating the growth of large, national banks. While this helped banks diversify, it also contributed to the consolidation of banking power, allowing institutions to become “[too big to fail](https:\/\/www.investopedia.com\/terms\/t\/too-big-to-fail.asp)” and increasing systemic risk across the financial system.\n\n**1999: The Gramm-Leach-Bliley Act (GLBA)**\n\n[GLBA](https:\/\/www.investopedia.com\/terms\/g\/glba.asp), also known as the Financial Services Modernization Act, repealed major parts of the Glass-Steagall Act of 1933, which had previously separated commercial banking from investment banking. By allowing banks to merge with securities and insurance companies, GLBA paved the way for “universal banks” that engaged in a wide range of financial services, including risky investments. This increase in complexity and interconnectedness heightened the risk of a widespread financial collapse.\n\n**2000: The Commodity Futures Modernization Act (CFMA)**\n\nThe [CFMA](https:\/\/www.investopedia.com\/terms\/c\/commodityfuturescontract.asp) removed many regulations from derivatives trading, including credit default swaps (CDS), a key factor in the 2008 financial crisis. By exempting CDS and other complex derivatives from regulation, the act allowed institutions to take on massive risks, which compounded losses when defaults on subprime loans increased. The lack of oversight meant that companies like AIG could issue large amounts of CDS with minimal capital reserves to cover potential losses.\n\n**Shift to “Light-Touch” Regulation in the 2000s**\n\nThe 2000s were marked by an overall shift toward “light-touch” regulation, especially within agencies like the SEC. The focus was on allowing financial markets to self-regulate and emphasizing innovation over caution. This attitude led to minimal oversight of mortgage-backed securities and [collateralized debt obligations (CDOs)](https:\/\/www.investopedia.com\/terms\/c\/cdo.asp) that bundled subprime loans, which ultimately proliferated risk throughout the system.\n\n**2004: SEC’s Net Capital Rule Change**\n\nIn 2004, the [Securities and Exchange Commission (SEC)](https:\/\/www.investopedia.com\/terms\/s\/sec.asp) allowed major investment banks to increase their leverage ratios significantly, meaning they could borrow much more relative to their capital. Previously, banks had been limited to a leverage ratio of 12 to one, but the new rule allowed ratios as high as 30 to one or even 40 to one.6 This change enabled banks to take on enormous risks by financing long-term assets with short-term debt, increasing their vulnerability to any market downturn.78\n\n### 7\\. Fannie Mae and Freddie Mac's Involvement\nIn the wake of the crash, many of those who backed the deregulatory efforts of the previous years were intent on blaming two government-sponsored enterprises, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), for the crisis.91011 Here’s a look at their involvement and why they’re often mentioned in discussions about the crash:\n\n**Role in the Housing Market**\n\nFannie Mae and Freddie Mac were created to promote homeownership by buying mortgages from lenders, packaging them into securities, and selling them to investors. This helped lenders free up capital to issue more loans, thus increasing homeownership. By the 2000s, both entities were heavily involved in purchasing mortgages, including riskier subprime loans, from the private market.\n\n**Increased Risk-Taking in the Early 2000s**\n\nUnder pressure from both political and market forces to expand homeownership, Fannie and Freddie increasingly purchased subprime and [alt-A loans](https:\/\/www.investopedia.com\/terms\/a\/alt-a.asp) (those with limited documentation or low credit quality). Although they initially held stricter underwriting standards than private lenders, Fannie and Freddie relaxed their criteria to compete with private institutions benefiting from the booming housing market.\n\n**Securitization of Risky Mortgages**\n\nLike private banks, Fannie and Freddie pooled mortgages into mortgage-backed securities and sold them to investors. While they maintained guarantees on some of these securities, they held significant exposure to the housing market. When housing prices fell, and foreclosures surged, Fannie and Freddie suffered substantial losses, needing a federal bailout in 2008 to prevent collapse. Their financial distress contributed to the crisis’s depth but did not initiate it.\n\n**Private Market Influence**\n\nMuch of the riskiest lending during the housing bubble came from private lenders who issued subprime mortgages with even lower standards than those of Fannie and Freddie. These private institutions created their own MBSs, often without the oversight or implied government backing that Fannie and Freddie had. This private-market securitization, which exploded in the early 2000s, exposed the financial system to unmanageable levels of risk and was a core driver of the crisis.\n\n**Systemic Impact, Not Direct Cause**\n\nFannie and Freddie were caught in the wave of broader housing market speculation and lending practices but didn’t drive the most extreme forms of subprime lending. Buying riskier loans contributed to inflating the housing bubble and increasing overall exposure to the housing market’s downturn, which worsened the crisis when it arrived. However, private lenders and Wall Street banks were primarily responsible for the riskiest practices and highest volumes of subprime loans.\n\n### 8\\. The Collapse of Wall Street Giants\nThe most proximate cause (the last domino to fall, as it were) of the crisis was the collapse of storied institutions at the heart of Wall Street. As mortgage defaults rose, financial giants holding large amounts of MBS, such as Lehman Brothers, faced mounting losses and liquidity crises. Lehman’s bankruptcy in 2008 triggered widespread panic, as it demonstrated that even major institutions could collapse. This eroded investor confidence globally, froze credit markets, and led to widespread economic distress.\n\n### \\$150 billion\nThe amount of [bailout money AIG received](https:\/\/www.investopedia.com\/articles\/economics\/09\/american-investment-group-aig-bailout.asp) from the U.S. federal government in 2008, which the company repaid with interest by 2013.3\n## Timeline of the 2008 Stock Market Crash\n**April 2, 2007: Major Subprime Lender Goes Under**\n\nNew Century Financial Corporation, a leading subprime mortgage lender, files for bankruptcy.12\n\n**July 31, 2007: Bear Stearns Files for Bankruptcy**\n\n[Bear Stearns goes under](https:\/\/www.investopedia.com\/articles\/07\/bear-stearns-collapse.asp), drowned in a sea of massive losses resulting from underwriting many of the investment vehicles linked to the subprime mortgage market.1314\n\n**Oct. 9, 2007: Stock Market Peak**\n\nIt was soon obvious to all that the market was in trouble, and a subprime mortgage crisis was looming. Homeowners defaulted at high rates as the creative variations of subprime mortgages reset to higher payments as home prices declined.\n\nMany homeowners reported being \"upside down\"—they owed more on their mortgages than their homes were worth—and could no longer flip them to make themselves whole. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. The [subprime meltdown](https:\/\/www.investopedia.com\/articles\/07\/subprime-overview.asp) was taking its toll on homeowners and the real estate market.\n\nDespite this apparent mess, the financial markets continued higher into October 2007, with the Dow reaching a closing high of 14,164 on Oct. 9.\n\n**December 2007: U.S. Enters Recession**\n\nThe turmoil eventually caught up, and by December 2007 the United States had fallen into a [recession](https:\/\/www.investopedia.com\/terms\/r\/recession.asp). Officially declared later, the U.S. economy was on the precipice as consumer spending fell, debts were being defaulted on, and unemployment was rising.\n\n**March 2008: Bear Stearns Acquired by JPMorgan Chase**\n\nIn a government-brokered deal, [Bear Stearns is sold](https:\/\/www.investopedia.com\/terms\/b\/bear-stearns.asp) to JPMorgan & Chase & Co. ([JPM](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=JPM)) for a fraction of its former value. The U.S. Federal Reserve15 stepped in with emergency funding to ensure the deal closed, aiming to prevent wider panic.\n\n**July 2008: IndyMac Bank Fails**\n\nBy early July 2008, the Dow Jones Industrial Average would trade below 11,000 for the first time in over two years.16 That would not be the end of the decline.\n\nIndyMac, a major mortgage lender, collapses under the weight of loan defaults. Its failure becomes one of the largest bank failures in U.S. history, prompting intervention by the Federal Deposit Insurance Corporation (FDIC).15 It won't be the last lender to collapse.\n\n### Fast Fact\nMany borrowers who obtained adjustable-rate subprime mortgages with low initial rates received no information from lenders about the details of such loans and found themselves trapped with unaffordable loan obligations when rates rose.17\n\n**Sept. 6, 2008: Federal Takeover of Fannie Mae and Freddie Mac**\n\nWith the financial markets down almost 20% from their October 2007 peaks, the government announces its [takeover of Fannie Mae and Freddie Mac](https:\/\/www.investopedia.com\/articles\/economics\/08\/fannie-mae-freddie-mac-credit-crisis.asp). This was a necessary step because of losses from heavy exposure to the collapsing subprime mortgage market.18\n\n![Two people hug outside of Lehman Brothers headquarters in New York on Sept. 15, 2008.](https:\/\/www.investopedia.com\/thmb\/N6MHzDnHyQkhhLmYOKb5Ddhd6M4=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-82823612-bede1aebbd234789925989e261bc3bf6.jpg)\n\n![Two people hug outside of Lehman Brothers headquarters in New York on Sept. 15, 2008.](https:\/\/www.investopedia.com\/thmb\/N6MHzDnHyQkhhLmYOKb5Ddhd6M4=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-82823612-bede1aebbd234789925989e261bc3bf6.jpg)\n\nNewly former employees of the bankrupt Lehman Brothers hug outside its offices in Manhattan, New York, Sept. 15, 2018.\n\nNicholas Roberts \/ Getty Images\n\n**Sept. 15, 2008: Lehman Brothers Declares Bankruptcy**\n\nOne week later, major investment banking firm [Lehman Brothers](https:\/\/www.investopedia.com\/terms\/l\/lehman-brothers.asp) succumbed to its overexposure to the subprime mortgage market. It announced the largest bankruptcy filing in U.S. history at that time.1920 The next day, markets plummeted, and the Dow closed down 499 points at 10,917.\n\n**Sept. 16, 2008: The \"[Buck Breaks](https:\/\/www.investopedia.com\/terms\/b\/breaking-the-buck.asp)**,**\" AIG Receives Bailout, Panic Spreads, the Fed Lowers Fed Funds Rate**\n\nThings now begin moving very quickly. The collapse of Lehman caused the net asset value ([NAV](https:\/\/www.investopedia.com\/terms\/n\/nav.asp)) of the Reserve Primary Fund to fall below \\$1 per share on Sept. 16, 2008. Investors were told that for every \\$1 invested, they were entitled to 97 cents. Given the staggering losses all around, this might appear insignificant—far from it.\n\nThe Reserve Primary Fund was a prominent money market fund, one of the oldest in the U.S. and long considered a stable, low-risk investment vehicle. Money market funds like the Reserve Primary Fund are typically seen as safe places to park cash, as they invest in high-quality, short-term debt such as commercial paper. They aim to maintain a stable NAV of \\$1 per share, giving investors predictable returns with minimal risk.\n\nHowever, the Reserve Primary Fund had invested in commercial paper issued by Lehman Brothers, a financial giant with significant exposure to subprime mortgage assets. When Lehman Brothers declared bankruptcy, the value of its commercial paper held by the Reserve Primary Fund suddenly dropped to near zero. This was the first time since the 1994 failure of a small money market fund that a major fund had “broken the buck.”\n\nBreaking the buck sent shock waves through the financial system. Money market funds were widely used by individuals, institutions, and corporations as a safe place for short-term cash. The loss of stability in such a trusted asset class caused immediate panic, leading investors to redeem their holdings en masse across the industry, fearing similar losses in other funds.\n\nPanic breaks out in the [money market](https:\/\/www.investopedia.com\/terms\/m\/moneymarket.asp) fund industry, resulting in massive redemption requests. The same day, Bank of America ([BAC](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=BAC)) announced it was buying Merrill Lynch, the nation's largest brokerage company.20\n\nIn addition, the credit rating for AIG is downgraded because of the credit derivative contracts they'd underwritten. AIG, facing insolvency because of losses on credit default swaps, receives an \\$85 billion government bailout to prevent further destabilization of the financial system.21\n\nFinally, on this busy day, the U.S. Federal Reserve announces it would maintain its federal funds rate at 2.0%.22\n\n**Sept. 17, 2008: SEC Bans Short Selling on Financial Sector Firms**\n\nThe SEC initiates a temporary ban on [short selling](https:\/\/www.investopedia.com\/terms\/s\/shortsale.asp) financial company stocks to help stabilize the markets.23 The markets surged on the news, and investors sent the Dow up 456 points to an intraday high of 11,483, closing up 361 at 11,388.\n\n**Sept. 18, 2008: Bailout Talks Begin**\n\nTreasury Secretary Henry Paulson proposes the Troubled Asset Relief Program ([TARP](https:\/\/www.investopedia.com\/terms\/t\/troubled-asset-relief-program-tarp.asp)) to buy up to \\$700 billion in toxic assets from banks to stabilize the financial sector. The news sends the Dow up 410 points.2425\n\nFor investors, those highs will be like the last gasp of air when a roller coaster climbs to its greatest height and is about to drop.21\n\n![A protestor stands outside Bear Stearns headquarters March 26, 2008 in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. ]()\n\n![A protestor stands outside Bear Stearns headquarters March 26, 2008 in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. ](https:\/\/www.investopedia.com\/thmb\/SThPKf0JHA1TPNN9fSlzMDeCEMc=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-80389147-5478cfd313c241f08eae88f3444a7e82.jpg)\n\nA protestor stands outside Bear Stearns headquarters March 26, 2008, in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank.\n\nChris Hondros \/ Getty Images\n\n**Sept. 19, 2008: The U.S. Treasury Announces a Temporary Guarantee for Money Market Funds**\n\nIn response to Reserve Primary Fund breaking the buck, the U.S. government quickly took steps to stabilize money markets, aiming to restore investor confidence and prevent further runs on these funds.\n\n**Sept. 21, 2008: GS and MS Shift to Holding Companies**\n\nGoldman Sachs Inc. ([GS](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=GS)) and Morgan Stanley ([MS](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=MS)), the last two of the major [investment banks](https:\/\/www.investopedia.com\/terms\/i\/investmentbank.asp) still standing, converted from investment banks to bank [holding companies](https:\/\/www.investopedia.com\/terms\/h\/holdingcompany.asp) to be able to obtain bailout funding.26\n\n**Sept. 25, 2008: Washington Mutual Fails**\n\nAfter a 10-day [bank run](https:\/\/www.investopedia.com\/terms\/b\/bankrun.asp), the [FDIC](https:\/\/www.investopedia.com\/terms\/f\/fdic.asp) seizes Washington Mutual, then the nation's largest savings and loan and one heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase.27\n\n**Sept. 29, 2008: Massive Market Decline**\n\nThe Dow declined 774 points (6.98%), at the time the largest one-day point drop in history.28\n\n**Oct. 3, 2008: TARP Passes**\n\nA reworked \\$700 billion TARP plan, renamed the [Emergency Economic Stabilization Act of 2008](https:\/\/www.investopedia.com\/terms\/e\/emergency-economic-stability-act.asp), passed with a bipartisan vote in Congress.29\n\n**Oct. 6-10**: **Market Collapse Continues**\n\nThe Dow continues to tumble, closing below 10,000 for the first time in years. By Oct. 10, it would bottom at 7,882, reflecting severe investor uncertainty and panic.\n\n![U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders including Brazil's President Luiz Inacio Lula da Silva (2nd-L), Japanese Prime Minister Taro Aso (5th-L) and Italian Prime Minister Silvio Berlusconi (2nd-R) gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders are gathered at the summit to address problems currently impacting the global economies. ]()\n\n![U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders including Brazil's President Luiz Inacio Lula da Silva (2nd-L), Japanese Prime Minister Taro Aso (5th-L) and Italian Prime Minister Silvio Berlusconi (2nd-R) gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders are gathered at the summit to address problems currently impacting the global economies. ](https:\/\/www.investopedia.com\/thmb\/b2fdvPTmgdtKx81oigfgGSikT00=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-83703386-c72c1369fd88463eabd33c90641f1d85.jpg)\n\nU.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders were hastily gathered at the summit to address the 2008 financial crisis.\n\nMatthew Cavanaugh \/ Getty Images\n\n**Late 2008 – Early 2009: Federal Reserve Lowers Interest Rates to Near Zero**\n\nTo stimulate the economy, the Federal Reserve reduces interest rates, aiming to improve borrowing conditions for businesses and individuals.\n\n### 0\\.16%\nThe U.S. Federal Reserve's key interest rate was 5.26% in mid-2007. By the end of 2008, it was 0.16%.30\n\n**March 2009: Market Bottoms Out**\n\nThe S\\&P 500 reaches its lowest point at 676.53. This signals the lowest point of the crisis, with gradual recovery beginning thereafter because of government intervention and market adjustments.\n\n**2009-2010: Dodd-Frank Wall Street Reform and Consumer Protection Act**\n\nA series of post-crisis regulatory reforms begins. The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced to overhaul financial regulation, aimed to reduce risks in the financial system, increase transparency, and protect consumers from unfair lending practices.\n\n## Long-Term Impacts of the 2008 Crisis\nThe 2008 financial crisis didn't just disappear when the stock market finally hit bottom. Its effects rippled through the American economy for years, fundamentally changing how banks operate, how homes are bought and sold, and how the government regulates Wall Street.\n\nThe human toll was staggering. According to data from the U.S. Federal Reserve, by 2010, over 8.7 million American jobs had vanished. Nearly 10 million families lost their homes to foreclosure. The average U.S. household lost about \\$30,000 in home value and \\$70,000 in stock wealth. The unemployment rate peaked at 10% in October 2009, and many workers who lost jobs during this period never fully recovered their earning potential.313233\n\nThe government's response reshaped the financial industry. Dodd-Frank introduced the most sweeping changes to financial regulation since the Great Depression. The law created the Consumer Financial Protection Bureau to guard against predatory lending practices, required banks to maintain larger cash reserves, and implemented the \"[Volcker Rule](https:\/\/www.investopedia.com\/terms\/v\/volcker-rule.asp),\" limiting banks' ability to make risky investments with customer deposits.\n\nBanks now face stricter oversight and must undergo regular \"stress tests\" to prove they could survive economic shocks. Mortgage lenders must verify borrowers' ability to repay loans. However, new financial innovations and the continued growth of \"[shadow banking](https:\/\/www.investopedia.com\/terms\/s\/shadow-banking-system.asp)\"—financial services provided by nonbank institutions—suggest that while the next crisis might not look exactly like 2008, the potential for financial instability remains.\n\n## What Caused the Financial Crisis of 2008?\nThe growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of \"toxic\" assets, the collapse of home prices, and more contributed to the financial crisis of 2008.\n\n## How Much Did Housing Prices Drop in 2008?\nFrom July 2006 to January 2009, the national median house price dropped by 29%.34\n\n## How Long Did the 2008 Housing Market Crisis Last?\nDifferent geographic areas recovered at different speeds. However, in general, the recovery began in 2011, more than three years after the housing crisis began. Home prices had fully recovered by 2012.35\n## The Bottom Line\nThe 2008 financial crisis serves as a stark reminder that financial innovation without proper oversight can have devastating consequences. What began with a housing bubble and risky mortgage lending practices escalated into a global financial meltdown through complex financial products and inadequate regulation.\n\nWhile new safeguards and regulations make an exact repeat of 2008 less likely, the crisis offers enduring lessons about the dangers of excessive risk-taking, the importance of transparency in financial markets, and the interconnected nature of global finance. Perhaps most importantly, it demonstrates how problems in seemingly isolated market segments can quickly spread to threaten the entire financial system, affecting everyone from Wall Street bankers to Main Street homeowners.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\n- [What defines a stock market crash and its economic impact?](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp)\n- [What initial conditions fueled the housing price bubble before the financial crisis?](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp)\n- [What are different types of financial crises beyond stock market crashes?](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp)\n\nASK\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. U.S. Federal Reserve. \"[Community Reinvestment Act (CRA)](https:\/\/www.federalreserve.gov\/consumerscommunities\/cra_about.htm).\"\n2. Congressional Research Service. \"[Bank Leverage Limits and Risk-Taking in the Mortgage Business](https:\/\/www.fdic.gov\/analysis\/cfr\/bank-research-conference\/annual-21st\/papers\/marodin-paper.pdf).\"\n3. Congressional Research Service. \"[Government Assistance for AIG: Summary and Cost](https:\/\/sgp.fas.org\/crs\/misc\/R42953.pdf).\" Summary Page.\n4. Baily, Martin Neil, Robert E. Litan, and Matthew S. Johnson. \"[The Origins of the Financial Crisis](https:\/\/www.brookings.edu\/wp-content\/uploads\/2016\/06\/11_origins_crisis_baily_litan.pdf).\" *The Brookings Institution, Fixing Finance Series*, vol. 3, November 2008, pp. 7-32.\n5. The Washington Post. \"[U.S. Consumer Debt Grows at Alarming Rate](https:\/\/www.washingtonpost.com\/archive\/business\/technology\/2004\/01\/12\/us-consumer-debt-grows-at-alarming-rate\/a445655b-8507-4082-802a-5b3b1e90272d\/).\"\n6. *Washington Post*. \"[What Caused the Financial Crisis? The Big Lie Goes Viral](https:\/\/www.washingtonpost.com\/business\/what-caused-the-financial-crisis-the-big-lie-goes-viral\/2011\/10\/31\/gIQAXlSOqM_story.html).\"\n7. Federal Deposit Insurance Corporation. \"[Origins of the Crisis](https:\/\/www.fdic.gov\/bank\/historical\/crisis\/chap1.pdf).\"\n8. Congressional Research Service. \"[Bank Capital Requirements: A Primer and Policy Issues](https:\/\/crsreports.congress.gov\/product\/pdf\/R\/R47447).\"\n9. American Enterprise Institute. \"[How Fannie, Freddie and Politicians Caused the Crisis](https:\/\/www.aei.org\/articles\/how-fannie-freddie-and-politicians-caused-the-crisis\/).\"\n10. Competitive Enterprise Institute. \"[The Financial Crisis 10 Years Later](https:\/\/cei.org\/blog\/the-financial-crisis-10-years-later-fannie-and-freddie-fueled-the-subprime-mortgage-bubble\/).\"\n11. *New York Times*. \"[Decade After Crisis, No Resolution for Fannie and Freddie](https:\/\/www.nytimes.com\/2017\/02\/07\/business\/dealbook\/decade-after-crisis-no-resolution-for-fannie-and-freddie.html).\"\n12. U.S. Federal Reserve of St. Louis. \"[New Century Financial Corporation 8-K](https:\/\/fraser.stlouisfed.org\/archival-collection\/securities-exchange-commission-5147\/new-century-financial-corporation-519318).\"\n13. The Wall Street Journal. \"[J.P. Morgan Buys Bear in Fire Sale, As Fed Widens Credit to Avert Crisis](https:\/\/www.wsj.com\/articles\/SB120569598608739825).\"\n14. Baily, Martin Neil, Robert E. Litan, and Matthew S. Johnson. \"[The Origins of the Financial Crisis](https:\/\/www.brookings.edu\/wp-content\/uploads\/2016\/06\/11_origins_crisis_baily_litan.pdf).\" *The Brookings Institution, Fixing Finance Series*, vol. 3, November 2008, pp. 32, 38-39.\n15. *New York Times*. \"[Regulators Seize Mortgage Lender](https:\/\/www.nytimes.com\/2008\/07\/12\/business\/12indymac.html).\"\n16. Yahoo Finance. \"[Dow Jones Industrial Average (^DJI): Historical Data](https:\/\/finance.yahoo.com\/quote\/%5EDJI\/history?period1=1215907200&period2=1216166400&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true).\" Date Range: July 13, 2008 to July 16, 2008.\n17. Center for American Progress. \"[The 2008 Housing Crisis](https:\/\/www.americanprogress.org\/article\/2008-housing-crisis\/).\"\n18. Federal Housing Finance Agency. \"[History of Fannie Mae and Freddie Mac Conservatorships](https:\/\/www.fhfa.gov\/Conservatorship\/Pages\/History-of-Fannie-Mae--Freddie-Conservatorships.aspx).\"\n19. U.S. Securities and Exchange Commission. \"[Statement on Proposed Lehman Brothers, Inc. Acquisition by Barclays](https:\/\/www.sec.gov\/news\/press\/2008\/2008-206.htm).\"\n20. *New York Times*. \"[Lehman Files for Bankruptcy; Merrill Is Sold](https:\/\/www.nytimes.com\/2008\/09\/15\/business\/15lehman.html).\"\n21. *New York Times*. \"[Fed Rescues AIG with \\$85 Billion Loan for 80% Stake](https:\/\/www.nytimes.com\/2008\/09\/17\/business\/worldbusiness\/17iht-17insure.16217125.html).\"\n22. U.S. Federal Reserve. \"[Statement](https:\/\/fraser.stlouisfed.org\/title\/677\/item\/22532\/content\/pdf\/20080916statement).\"\n23. U.S. Securities and Exchange Commission. \"[SEC Issues New Rules to Protect Investors Against Naked Short Selling Abuses](https:\/\/www.sec.gov\/news\/press\/2008\/2008-204.htm).\"\n24. U.S. Department of Treasury. \"[Testimony by Treasury Secretary Henry M. Paulson, Jr](https:\/\/home.treasury.gov\/news\/press-releases\/hp1279).\"\n25. U.S. Department of Treasury. \"[About TARP](https:\/\/home.treasury.gov\/data\/troubled-assets-relief-program\/about-tarp).\"\n26. The New York Times. \"[As Goldman and Morgan Shift, a Wall St. Era Ends](https:\/\/archive.nytimes.com\/dealbook.nytimes.com\/2008\/09\/21\/goldman-morgan-to-become-bank-holding-companies\/).\"\n27. U.S. Securities and Exchange Commission. \"[JP Morgan Chase Acquires the Deposits, Assets, and Certain Liabilities of Washington Mutual's Banking Operations](https:\/\/www.sec.gov\/Archives\/edgar\/data\/19617\/000119312508201638\/dex991.htm).\"\n28. Yahoo Finance. \"[Dow Jones Industrial Average (^DJI): Historical Data](https:\/\/finance.yahoo.com\/quote\/%5EDJI\/history?period1=1221523200&period2=1221782400&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true).\" Date Range: Sept. 16, 2008 to Sept. 19, 2008.\n29. Congressional Research Service. \"[Troubled Asset Relief Program (TARP): Implementation and Status](https:\/\/crsreports.congress.gov\/product\/pdf\/R\/R41427).\" Summary Page.\n30. U.S. Federal Reserve of St. Louis. \"[Monthly Federal Funds Effective Rate, U.S](https:\/\/fred.stlouisfed.org\/).\"\n31. U.S. Federal Reserve of St. Louis. \"[Median Sales Price of Houses Sold for the United States](https:\/\/fred.stlouisfed.org\/series\/MSPUS).\"\n32. U.S. Federal Reserve of St. Louis. \"[Unemployment Rate](https:\/\/fred.stlouisfed.org\/series\/UNRATE).\"\n33. U.S. Federal Reserve of St. Louis. \"[Delinquencies and Delinquency Rates](https:\/\/fred.stlouisfed.org\/categories\/32440).\"\n34. Demographia. \"[The Housing Downturn in the United States 2009 First Quarter Update](http:\/\/demographia.com\/db-ushsg2009q1.pdf).\" Page 1.\n35. Medium. \"[Recession Strategy: What Can 2008’s Data Teach Us About When to Buy and When to Sell?](https:\/\/medium.com\/atlasa\/recession-strategy-what-can-2008s-data-teach-us-about-when-to-buy-and-when-to-sell-3515b838e598#:~:text=It%20took%203.5%20years%20for,by%2019%25%20after%20the%20recession.)\"\n\nCompare Accounts\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\nRead more\n\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n- [Markets](https:\/\/www.investopedia.com\/markets-4689752)\n- [International Markets](https:\/\/www.investopedia.com\/international-markets-4689750)\n\nPartner Links\n\n## Related Articles\n[![Bombay Stock Exchange: The first and largest securities market in India.]() ![Bombay Stock Exchange: The first and largest securities market in India.](https:\/\/www.investopedia.com\/thmb\/EStJ3XIwii82SMlMirWRNfILHtA=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/Bombaystockexchange_final-61a1e6f7ec98464e8c8053f805d155c5.png) The Bombay Stock Exchange (BSE): Asia's First Securities Market](https:\/\/www.investopedia.com\/terms\/b\/bombaystockexchange.asp)\n\n[![Nighttime view of blue stock data screen next to sidewalk in urban center.]() ![Nighttime view of blue stock data screen next to sidewalk in urban center.](https:\/\/www.investopedia.com\/thmb\/Y8MaxUEy_np3Fi4iiRenvNFpQDY=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/investing16-5bfc2b8fc9e77c00519aa657.jpg) Foreign Currency Effects: Definition, Investment Impact, Example](https:\/\/www.investopedia.com\/terms\/f\/foreigncurrencyeffects.asp)\n\n[![Group of professional black people]() ![Group of professional black people](https:\/\/www.investopedia.com\/thmb\/R7r1ATeuy2udO4VxA94eALYNfp4=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1081702848-021f38f7f0034905a972bb01eddf042f.jpg) RCEP Explained: Fostering Global Trade Relations](https:\/\/www.investopedia.com\/terms\/r\/regional-comprehensive-economic-partnership-rcep.asp)\n\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/9N7awXlUSMF0GaLB4ekoKUkrf84=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/investing9-5bfc2b8d46e0fb0051bddfee.jpg) Noise: What it Means, Cause, Alternatives](https:\/\/www.investopedia.com\/terms\/n\/noise.asp)\n\n[![A bear and bull statue outside the Frankfurt Stock Exchange]() ![A bear and bull statue outside the Frankfurt Stock Exchange](https:\/\/www.investopedia.com\/thmb\/TjcOPaC1Wa42NoGo731w49qmlN4=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-515555194-6e815f6a6d6e49b492acfd3d5e5c28aa.jpg) Bull vs. Bear Markets: What's the Difference?](https:\/\/www.investopedia.com\/insights\/digging-deeper-bull-and-bear-markets\/)\n\n[![A closeup of a hand holding a pen and pointing to a line on a screen displaying stock data that shows a recovery in price.]() ![A closeup of a hand holding a pen and pointing to a line on a screen displaying stock data that shows a recovery in price.](https:\/\/www.investopedia.com\/thmb\/EhuHlH3GtGurbH1v9y1MZ4-wlzw=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/U-ShapedRecovery-f265f904cae845799fe7c6c5e27cc13e.jpg) U-Shaped Recovery: What It Means, How It Works, and Examples](https:\/\/www.investopedia.com\/terms\/u\/u-shaped-recovery.asp)\n\n[![Business Couple Discussing Business Profit on a Modern Interface]() ![Business Couple Discussing Business Profit on a Modern Interface](https:\/\/www.investopedia.com\/thmb\/Dr6VrPde7GwoNL5vvSS2ScvGzbc=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-985884916-625a2b5fb8dc44eca0b8492d516c1d02.jpg) Tech Bubble Insights: Definition, Dynamics, and Notable Instances](https:\/\/www.investopedia.com\/terms\/t\/tech_bubble.asp)\n\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/Wr3066-JYFe1ojmSpc-7ukZk_kg=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/shutterstock_112522391-5bfc2b9846e0fb0051bde2d3.jpg) 6 Ways to Invest in Foreign Stocks and Diversify Your Portfolio](https:\/\/www.investopedia.com\/articles\/investing\/032615\/how-trade-foreign-stocks.asp)\n\n[![Kuala Lumpur cityscape with Petronas Towers at sunset, Malaysia]() ![Kuala Lumpur cityscape with Petronas Towers at sunset, Malaysia](https:\/\/www.investopedia.com\/thmb\/4OI3k_sbWZ4fGllX6hAGK_-1SoQ=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/kuala-lumpur-cityscape-with-petronas-towers-at-sunset--malaysia-1148024549-da982d349f7c492ba978120781a6db16.jpg) What Defines a Tiger Economy? Insights and Global Examples](https:\/\/www.investopedia.com\/terms\/t\/tigereconomy.asp)\n\n[![Aerial View of Buildings in City]() ![Aerial View of Buildings in City](https:\/\/www.investopedia.com\/thmb\/qcHrVhAGOpqGZawa-SQ3JYlNdgI=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/aerial-view-of-buildings-in-city-965094550-3759b2a498cb478bbb124dbb70f81824-5501cbe99c094cecb11fdd058d01fb73.jpg) Role and Function of India's SEBI in Securities Regulation](https:\/\/www.investopedia.com\/terms\/s\/sebi.asp)\n\n[![City of London financial district with Royal Exchange building, London, England, UK]() ![City of London financial district with Royal Exchange building, London, England, UK](https:\/\/www.investopedia.com\/thmb\/1Ae4tkjGqyhVPWAR_tEe8DgdPH4=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/city-of-london-financial-district-with-royal-exchange-building--london--england--uk-913866368-bd4527f4d5f04f478c2d1f2c2c7f3def.jpg) What is a Jobber? Understanding Their Role in Stockjobbing](https:\/\/www.investopedia.com\/terms\/j\/jobber.asp)\n\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/0gEvqa3USxLYNuKR27A7wq4UFZE=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/investing20-5bfc2b8f46e0fb00517be081.jpg) What Is a Blue Chip Swap? Definition and Impact](https:\/\/www.investopedia.com\/terms\/b\/bluechipswap.asp)\n\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/okowPHHd13gf3lIirO09CV7gUDo=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/investing5-5bfc2b8e46e0fb0026016f0e.jpg) Guide to International Depository Receipts: Uses and Definition](https:\/\/www.investopedia.com\/terms\/i\/idr.asp)\n\n[![Midsection Businessmen Analyzing Charts on Laptop in Office]() ![Midsection Businessmen Analyzing Charts on Laptop in Office](https:\/\/www.investopedia.com\/thmb\/rFuYgvtGOzSCAfsqr0MuPFc2VVk=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1128046391-3672d109e5734da0831dcd6791ce0230.jpg) What Is the Dow Jones Sustainability World Index? Key Facts and Methodology](https:\/\/www.investopedia.com\/terms\/d\/djones-sustainability-world.asp)\n\n[![A busy street in Havana, Cuba]() ![A busy street in Havana, Cuba](https:\/\/www.investopedia.com\/thmb\/xf8tYXA3hPwXECwhKHA7YOK2nXc=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/TAL-havana-cuba-WTG2023-fd6af45f63c2460b99d10eb58f98df6e.jpg) How Ending the U.S. Embargo Could Transform Cuba's Economy](https:\/\/www.investopedia.com\/articles\/investing\/022415\/impact-ending-us-embargo-cuba.asp)\n\n[![Hong Kong Victoria harbor at sunset]() ![Hong Kong Victoria harbor at sunset](https:\/\/www.investopedia.com\/thmb\/lS48_z3Da8o3OSrGADoj17i5mkA=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1141122437-fd9fd062e8604e9899f0875b6f628a4b.jpg) Special Administrative Regions in China: Hong Kong and Macau Explained](https:\/\/www.investopedia.com\/terms\/s\/special-administrative-region.asp)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Newsletter Sign Up](https:\/\/www.investopedia.com\/articles\/economics\/09\/subprime-market-2008.asp)\n\nFollow Us\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n- [Simulator](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n- [Banking](https:\/\/www.investopedia.com\/banking-4427754)\n- [Personal Finance](https:\/\/www.investopedia.com\/personal-finance-4427760)\n- [Economy](https:\/\/www.investopedia.com\/economy-4689801)\n- [Reviews](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n- [Dictionary](https:\/\/www.investopedia.com\/financial-term-dictionary-4769738)\n\n- [About Us](https:\/\/www.investopedia.com\/about-us-5093223)\n- [Editorial Process](https:\/\/www.investopedia.com\/legal-4768893#toc-editorial-policy)\n- [Careers](https:\/\/www.people.inc\/careers)\n- [Contact Us](https:\/\/support.investopedia.com\/contactus)\n- [Privacy Policy](https:\/\/www.people.inc\/brands-privacy)\n- [Terms of Service](https:\/\/www.people.inc\/brands-termsofservice)\n- [Advertise](https:\/\/www.people.inc\/advertising)\n\n- [\\#](https:\/\/www.investopedia.com\/terms-beginning-with-num-4769350)\n- [A](https:\/\/www.investopedia.com\/terms-beginning-with-a-4769351)\n- [B](https:\/\/www.investopedia.com\/terms-beginning-with-b-4769352)\n- [C](https:\/\/www.investopedia.com\/terms-beginning-with-c-4769353)\n- [D](https:\/\/www.investopedia.com\/terms-beginning-with-d-4769354)\n- [E](https:\/\/www.investopedia.com\/terms-beginning-with-e-4769355)\n- [F](https:\/\/www.investopedia.com\/terms-beginning-with-f-4769356)\n- [G](https:\/\/www.investopedia.com\/terms-beginning-with-g-4769357)\n- [H](https:\/\/www.investopedia.com\/terms-beginning-with-h-4769358)\n- [I](https:\/\/www.investopedia.com\/terms-beginning-with-i-4769359)\n- [J](https:\/\/www.investopedia.com\/terms-beginning-with-j-4769360)\n- [K](https:\/\/www.investopedia.com\/terms-beginning-with-k-4769361)\n- [L](https:\/\/www.investopedia.com\/terms-beginning-with-l-4769362)\n- [M](https:\/\/www.investopedia.com\/terms-beginning-with-m-4769363)\n- [N](https:\/\/www.investopedia.com\/terms-beginning-with-n-4769364)\n- [O](https:\/\/www.investopedia.com\/terms-beginning-with-o-4769365)\n- [P](https:\/\/www.investopedia.com\/terms-beginning-with-p-4769366)\n- [Q](https:\/\/www.investopedia.com\/terms-beginning-with-q-4769367)\n- [R](https:\/\/www.investopedia.com\/terms-beginning-with-r-4769368)\n- [S](https:\/\/www.investopedia.com\/terms-beginning-with-s-4769369)\n- [T](https:\/\/www.investopedia.com\/terms-beginning-with-t-4769370)\n- [U](https:\/\/www.investopedia.com\/terms-beginning-with-u-4769371)\n- [V](https:\/\/www.investopedia.com\/terms-beginning-with-v-4769372)\n- [W](https:\/\/www.investopedia.com\/terms-beginning-with-w-4769373)\n- [X](https:\/\/www.investopedia.com\/terms-beginning-with-x-4769374)\n- [Y](https:\/\/www.investopedia.com\/terms-beginning-with-y-4769375)\n- [Z](https:\/\/www.investopedia.com\/terms-beginning-with-z-4769376)\n\nInvestopedia is part of the [People Inc.](https:\/\/www.people.inc\/) publishing family.\n\nNewsletter Sign Up\n\nNewsletter Sign Up\n\n![]()","attrs_readable_markdown":"### Key Takeaways\n- The 2008 financial crisis was driven by risky mortgage lending, complex financial instruments like MBS, and inadequate regulation.\n- Credit default swaps (CDS) exacerbated the crisis, as these unregulated financial products failed in the collapsing housing market.\n- The crisis resulted in the Dodd-Frank Act, aimed at increasing regulation and preventing future financial collapses.\n- U.S. economic devastation included a \\$16 trillion loss in household net worth and unprecedented reforms.\n- Despite safeguards, markets face risks from new financial products like derivatives and shadow banking systems.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nThe 2008 financial crisis was primarily triggered by the collapse of the housing bubble, leading to the worst economic downturn since the Great Depression. The crisis began years earlier as risky financial practices grew unchecked, creating a housing bubble that eventually burst, causing billions in global economic losses. Key factors included subprime mortgage lending, risky financial products, and regulatory failures.\n\nMany Americans recall watching in horror as the Dow Jones Industrial Average plummeted nearly 780 points in a single day in October of that year, then its biggest one-day drop in history. The seeds of the crisis would cost the global economy more than \\$2 trillion of economic growth.\n\n## Key Factors Leading to the 2008 Stock Market Collapse\nThe story of the 2008 stock market crash is more than just numbers on a screen or complex financial instruments. It's about homeowners who lost everything when their [adjustable-rate mortgages](https:\/\/www.investopedia.com\/terms\/a\/arm.asp) suddenly jumped beyond what they could afford, retirees who had their life savings cut in half, and workers who lost jobs as businesses shuttered in the subsequent [Great Recession](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp). Understanding how this crisis unfolded isn't just about learning history—it's about recognizing warning signs that could prevent future financial disasters.\n\nHere’s a breakdown of the main factors behind the crash.\n\n### 1\\. The Housing Bubble and the Role of Subprime Mortgages\nThe crisis began with a housing bubble, fueled by years of ultra-low interest rates and an increased availability of mortgages. Financial institutions offered “subprime” mortgages to people with low creditworthiness, often with little or no income verification. These high-risk loans, initially affordable because of low introductory rates, became unmanageable when interest rates adjusted upward, causing many borrowers to default.\n\nThroughout the 1990s and early 2000s, the government encouraged homeownership and supported policies that enabled lenders to offer mortgages to more people, including those with low credit scores. Policies like the [Community Reinvestment Act](https:\/\/www.investopedia.com\/terms\/c\/community_reinvestment_act.asp) (1977) were often blamed for the crisis, but it’s more accurate to say that the private sector took these policies and ran with them by loosening credit standards and pursuing aggressive lending practices to profit from and prop up the housing boom.12\n\n### 2\\. Securitization: The Impact of Mortgage-Backed Securities\nFinancial institutions pooled these risky subprime loans into [mortgage-backed securities (MBS)](https:\/\/www.investopedia.com\/terms\/m\/mbs.asp) and sold them to investors worldwide. MBSs were complex financial products that appeared to offer high returns with low risk, because of the presumed diversification of underlying assets. However, as housing prices fell and defaults increased, the value of these securities plummeted, creating a ripple effect across the financial system.\n\n### 3\\. Credit Default Swaps: Risks and Derivatives\nTo further “protect” against potential losses on MBS, banks and investors turned to credit default swaps, a form of insurance on these securities. Thus, another popular investment vehicle during this period became a credit derivative, the [credit default swap (CDS)](https:\/\/www.investopedia.com\/terms\/c\/creditdefaultswap.asp).\n\nCDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was largely unregulated. This meant that there was no requirement that the issuers of CDS contracts maintain enough money in their reserves to pay out under a worst-case scenario (such as an economic downturn). In early 2008, this spelled potential disaster for American International Group, Inc. (AIG), one of the nation's leading financial companies, when it couldn't meet claims and announced huge losses in its portfolio of underwritten CDS contracts.34\n\n### 4\\. The Dangers of Adjustable-Rate Mortgages\nAmong the most potentially harmful of the mortgages offered to subprime borrowers were the [interest-only ARM](https:\/\/www.investopedia.com\/terms\/i\/interestonlyarm.asp) and the payment option ARM. Both were adjustable-rate mortgages. These mortgages allow the borrower to make much lower initial payments than would be due under a fixed-rate mortgage. After a period of time, often only two or three years, these ARMs reset, often at higher rates. The payments then fluctuate as frequently as monthly, sometimes resulting in much larger payments than those the borrower paid initially.\n\nIn the up-trending market (and growing housing bubble) that existed in the early 2000s, these mortgages were thought to be virtually risk-free. Borrowers could end up with positive equity despite their low mortgage payments because their homes had increased in value since the purchase date. If they couldn't afford the higher payments after their mortgage rates reset, they could simply sell the homes for a profit.\n\n### 5\\. Escalating Consumer Debt: A Crisis Catalyst\nTo compound the potential mortgage risk, total [consumer debt](https:\/\/www.investopedia.com\/terms\/c\/consumer-debt.asp), in general, continued to grow at an astonishing rate. In 2004, consumer debt hit \\$2 trillion for the first time, meaning it doubled in less than 10 years.5\n\n### 6\\. How Regulatory Oversight Changes Fueled the Crisis\nThe years leading up to the 2008 financial crisis were marked by significant regulatory and legal changes that reduced oversight and fueled risk-taking in the financial industry. Here are some key changes from the 1980s through the early 2000s that helped set the stage for the crisis:\n\n**1982: [The Garn-St. Germain Depository Institutions Act](https:\/\/www.investopedia.com\/terms\/g\/garn-st-germain-depository-institutions-act.asp)**\n\nThis act deregulated the savings and loan industry, allowing institutions to expand into new types of lending, such as adjustable-rate mortgages. It was intended to help struggling banks but led to riskier lending practices. The act is sometimes credited with setting a precedent for financial deregulation that would continue through the 1980s and beyond.\n\n**1994: The Riegle-Neal Interstate Banking and Branching Efficiency Act**\n\nThis act removed barriers for banks to operate across state lines, facilitating the growth of large, national banks. While this helped banks diversify, it also contributed to the consolidation of banking power, allowing institutions to become “[too big to fail](https:\/\/www.investopedia.com\/terms\/t\/too-big-to-fail.asp)” and increasing systemic risk across the financial system.\n\n**1999: The Gramm-Leach-Bliley Act (GLBA)**\n\n[GLBA](https:\/\/www.investopedia.com\/terms\/g\/glba.asp), also known as the Financial Services Modernization Act, repealed major parts of the Glass-Steagall Act of 1933, which had previously separated commercial banking from investment banking. By allowing banks to merge with securities and insurance companies, GLBA paved the way for “universal banks” that engaged in a wide range of financial services, including risky investments. This increase in complexity and interconnectedness heightened the risk of a widespread financial collapse.\n\n**2000: The Commodity Futures Modernization Act (CFMA)**\n\nThe [CFMA](https:\/\/www.investopedia.com\/terms\/c\/commodityfuturescontract.asp) removed many regulations from derivatives trading, including credit default swaps (CDS), a key factor in the 2008 financial crisis. By exempting CDS and other complex derivatives from regulation, the act allowed institutions to take on massive risks, which compounded losses when defaults on subprime loans increased. The lack of oversight meant that companies like AIG could issue large amounts of CDS with minimal capital reserves to cover potential losses.\n\n**Shift to “Light-Touch” Regulation in the 2000s**\n\nThe 2000s were marked by an overall shift toward “light-touch” regulation, especially within agencies like the SEC. The focus was on allowing financial markets to self-regulate and emphasizing innovation over caution. This attitude led to minimal oversight of mortgage-backed securities and [collateralized debt obligations (CDOs)](https:\/\/www.investopedia.com\/terms\/c\/cdo.asp) that bundled subprime loans, which ultimately proliferated risk throughout the system.\n\n**2004: SEC’s Net Capital Rule Change**\n\nIn 2004, the [Securities and Exchange Commission (SEC)](https:\/\/www.investopedia.com\/terms\/s\/sec.asp) allowed major investment banks to increase their leverage ratios significantly, meaning they could borrow much more relative to their capital. Previously, banks had been limited to a leverage ratio of 12 to one, but the new rule allowed ratios as high as 30 to one or even 40 to one.6 This change enabled banks to take on enormous risks by financing long-term assets with short-term debt, increasing their vulnerability to any market downturn.78\n\n### 7\\. Fannie Mae and Freddie Mac's Involvement\nIn the wake of the crash, many of those who backed the deregulatory efforts of the previous years were intent on blaming two government-sponsored enterprises, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), for the crisis.91011 Here’s a look at their involvement and why they’re often mentioned in discussions about the crash:\n\n**Role in the Housing Market**\n\nFannie Mae and Freddie Mac were created to promote homeownership by buying mortgages from lenders, packaging them into securities, and selling them to investors. This helped lenders free up capital to issue more loans, thus increasing homeownership. By the 2000s, both entities were heavily involved in purchasing mortgages, including riskier subprime loans, from the private market.\n\n**Increased Risk-Taking in the Early 2000s**\n\nUnder pressure from both political and market forces to expand homeownership, Fannie and Freddie increasingly purchased subprime and [alt-A loans](https:\/\/www.investopedia.com\/terms\/a\/alt-a.asp) (those with limited documentation or low credit quality). Although they initially held stricter underwriting standards than private lenders, Fannie and Freddie relaxed their criteria to compete with private institutions benefiting from the booming housing market.\n\n**Securitization of Risky Mortgages**\n\nLike private banks, Fannie and Freddie pooled mortgages into mortgage-backed securities and sold them to investors. While they maintained guarantees on some of these securities, they held significant exposure to the housing market. When housing prices fell, and foreclosures surged, Fannie and Freddie suffered substantial losses, needing a federal bailout in 2008 to prevent collapse. Their financial distress contributed to the crisis’s depth but did not initiate it.\n\n**Private Market Influence**\n\nMuch of the riskiest lending during the housing bubble came from private lenders who issued subprime mortgages with even lower standards than those of Fannie and Freddie. These private institutions created their own MBSs, often without the oversight or implied government backing that Fannie and Freddie had. This private-market securitization, which exploded in the early 2000s, exposed the financial system to unmanageable levels of risk and was a core driver of the crisis.\n\n**Systemic Impact, Not Direct Cause**\n\nFannie and Freddie were caught in the wave of broader housing market speculation and lending practices but didn’t drive the most extreme forms of subprime lending. Buying riskier loans contributed to inflating the housing bubble and increasing overall exposure to the housing market’s downturn, which worsened the crisis when it arrived. However, private lenders and Wall Street banks were primarily responsible for the riskiest practices and highest volumes of subprime loans.\n\n### 8\\. The Collapse of Wall Street Giants\nThe most proximate cause (the last domino to fall, as it were) of the crisis was the collapse of storied institutions at the heart of Wall Street. As mortgage defaults rose, financial giants holding large amounts of MBS, such as Lehman Brothers, faced mounting losses and liquidity crises. Lehman’s bankruptcy in 2008 triggered widespread panic, as it demonstrated that even major institutions could collapse. This eroded investor confidence globally, froze credit markets, and led to widespread economic distress.\n\n### \\$150 billion\nThe amount of [bailout money AIG received](https:\/\/www.investopedia.com\/articles\/economics\/09\/american-investment-group-aig-bailout.asp) from the U.S. federal government in 2008, which the company repaid with interest by 2013.3\n## Timeline of the 2008 Stock Market Crash\n**April 2, 2007: Major Subprime Lender Goes Under**\n\nNew Century Financial Corporation, a leading subprime mortgage lender, files for bankruptcy.12\n\n**July 31, 2007: Bear Stearns Files for Bankruptcy**\n\n[Bear Stearns goes under](https:\/\/www.investopedia.com\/articles\/07\/bear-stearns-collapse.asp), drowned in a sea of massive losses resulting from underwriting many of the investment vehicles linked to the subprime mortgage market.1314\n\n**Oct. 9, 2007: Stock Market Peak**\n\nIt was soon obvious to all that the market was in trouble, and a subprime mortgage crisis was looming. Homeowners defaulted at high rates as the creative variations of subprime mortgages reset to higher payments as home prices declined.\n\nMany homeowners reported being \"upside down\"—they owed more on their mortgages than their homes were worth—and could no longer flip them to make themselves whole. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. The [subprime meltdown](https:\/\/www.investopedia.com\/articles\/07\/subprime-overview.asp) was taking its toll on homeowners and the real estate market.\n\nDespite this apparent mess, the financial markets continued higher into October 2007, with the Dow reaching a closing high of 14,164 on Oct. 9.\n\n**December 2007: U.S. Enters Recession**\n\nThe turmoil eventually caught up, and by December 2007 the United States had fallen into a [recession](https:\/\/www.investopedia.com\/terms\/r\/recession.asp). Officially declared later, the U.S. economy was on the precipice as consumer spending fell, debts were being defaulted on, and unemployment was rising.\n\n**March 2008: Bear Stearns Acquired by JPMorgan Chase**\n\nIn a government-brokered deal, [Bear Stearns is sold](https:\/\/www.investopedia.com\/terms\/b\/bear-stearns.asp) to JPMorgan & Chase & Co. ([JPM](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=JPM)) for a fraction of its former value. The U.S. Federal Reserve15 stepped in with emergency funding to ensure the deal closed, aiming to prevent wider panic.\n\n**July 2008: IndyMac Bank Fails**\n\nBy early July 2008, the Dow Jones Industrial Average would trade below 11,000 for the first time in over two years.16 That would not be the end of the decline.\n\nIndyMac, a major mortgage lender, collapses under the weight of loan defaults. Its failure becomes one of the largest bank failures in U.S. history, prompting intervention by the Federal Deposit Insurance Corporation (FDIC).15 It won't be the last lender to collapse.\n\n### Fast Fact\nMany borrowers who obtained adjustable-rate subprime mortgages with low initial rates received no information from lenders about the details of such loans and found themselves trapped with unaffordable loan obligations when rates rose.17\n\n**Sept. 6, 2008: Federal Takeover of Fannie Mae and Freddie Mac**\n\nWith the financial markets down almost 20% from their October 2007 peaks, the government announces its [takeover of Fannie Mae and Freddie Mac](https:\/\/www.investopedia.com\/articles\/economics\/08\/fannie-mae-freddie-mac-credit-crisis.asp). This was a necessary step because of losses from heavy exposure to the collapsing subprime mortgage market.18\n\nNewly former employees of the bankrupt Lehman Brothers hug outside its offices in Manhattan, New York, Sept. 15, 2018.\n\nNicholas Roberts \/ Getty Images\n\n**Sept. 15, 2008: Lehman Brothers Declares Bankruptcy**\n\nOne week later, major investment banking firm [Lehman Brothers](https:\/\/www.investopedia.com\/terms\/l\/lehman-brothers.asp) succumbed to its overexposure to the subprime mortgage market. It announced the largest bankruptcy filing in U.S. history at that time.1920 The next day, markets plummeted, and the Dow closed down 499 points at 10,917.\n\n**Sept. 16, 2008: The \"[Buck Breaks](https:\/\/www.investopedia.com\/terms\/b\/breaking-the-buck.asp)**,**\" AIG Receives Bailout, Panic Spreads, the Fed Lowers Fed Funds Rate**\n\nThings now begin moving very quickly. The collapse of Lehman caused the net asset value ([NAV](https:\/\/www.investopedia.com\/terms\/n\/nav.asp)) of the Reserve Primary Fund to fall below \\$1 per share on Sept. 16, 2008. Investors were told that for every \\$1 invested, they were entitled to 97 cents. Given the staggering losses all around, this might appear insignificant—far from it.\n\nThe Reserve Primary Fund was a prominent money market fund, one of the oldest in the U.S. and long considered a stable, low-risk investment vehicle. Money market funds like the Reserve Primary Fund are typically seen as safe places to park cash, as they invest in high-quality, short-term debt such as commercial paper. They aim to maintain a stable NAV of \\$1 per share, giving investors predictable returns with minimal risk.\n\nHowever, the Reserve Primary Fund had invested in commercial paper issued by Lehman Brothers, a financial giant with significant exposure to subprime mortgage assets. When Lehman Brothers declared bankruptcy, the value of its commercial paper held by the Reserve Primary Fund suddenly dropped to near zero. This was the first time since the 1994 failure of a small money market fund that a major fund had “broken the buck.”\n\nBreaking the buck sent shock waves through the financial system. Money market funds were widely used by individuals, institutions, and corporations as a safe place for short-term cash. The loss of stability in such a trusted asset class caused immediate panic, leading investors to redeem their holdings en masse across the industry, fearing similar losses in other funds.\n\nPanic breaks out in the [money market](https:\/\/www.investopedia.com\/terms\/m\/moneymarket.asp) fund industry, resulting in massive redemption requests. The same day, Bank of America ([BAC](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=BAC)) announced it was buying Merrill Lynch, the nation's largest brokerage company.20\n\nIn addition, the credit rating for AIG is downgraded because of the credit derivative contracts they'd underwritten. AIG, facing insolvency because of losses on credit default swaps, receives an \\$85 billion government bailout to prevent further destabilization of the financial system.21\n\nFinally, on this busy day, the U.S. Federal Reserve announces it would maintain its federal funds rate at 2.0%.22\n\n**Sept. 17, 2008: SEC Bans Short Selling on Financial Sector Firms**\n\nThe SEC initiates a temporary ban on [short selling](https:\/\/www.investopedia.com\/terms\/s\/shortsale.asp) financial company stocks to help stabilize the markets.23 The markets surged on the news, and investors sent the Dow up 456 points to an intraday high of 11,483, closing up 361 at 11,388.\n\n**Sept. 18, 2008: Bailout Talks Begin**\n\nTreasury Secretary Henry Paulson proposes the Troubled Asset Relief Program ([TARP](https:\/\/www.investopedia.com\/terms\/t\/troubled-asset-relief-program-tarp.asp)) to buy up to \\$700 billion in toxic assets from banks to stabilize the financial sector. The news sends the Dow up 410 points.2425\n\nFor investors, those highs will be like the last gasp of air when a roller coaster climbs to its greatest height and is about to drop.21\n\nA protestor stands outside Bear Stearns headquarters March 26, 2008, in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank.\n\nChris Hondros \/ Getty Images\n\n**Sept. 19, 2008: The U.S. Treasury Announces a Temporary Guarantee for Money Market Funds**\n\nIn response to Reserve Primary Fund breaking the buck, the U.S. government quickly took steps to stabilize money markets, aiming to restore investor confidence and prevent further runs on these funds.\n\n**Sept. 21, 2008: GS and MS Shift to Holding Companies**\n\nGoldman Sachs Inc. ([GS](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=GS)) and Morgan Stanley ([MS](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=MS)), the last two of the major [investment banks](https:\/\/www.investopedia.com\/terms\/i\/investmentbank.asp) still standing, converted from investment banks to bank [holding companies](https:\/\/www.investopedia.com\/terms\/h\/holdingcompany.asp) to be able to obtain bailout funding.26\n\n**Sept. 25, 2008: Washington Mutual Fails**\n\nAfter a 10-day [bank run](https:\/\/www.investopedia.com\/terms\/b\/bankrun.asp), the [FDIC](https:\/\/www.investopedia.com\/terms\/f\/fdic.asp) seizes Washington Mutual, then the nation's largest savings and loan and one heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase.27\n\n**Sept. 29, 2008: Massive Market Decline**\n\nThe Dow declined 774 points (6.98%), at the time the largest one-day point drop in history.28\n\n**Oct. 3, 2008: TARP Passes**\n\nA reworked \\$700 billion TARP plan, renamed the [Emergency Economic Stabilization Act of 2008](https:\/\/www.investopedia.com\/terms\/e\/emergency-economic-stability-act.asp), passed with a bipartisan vote in Congress.29\n\n**Oct. 6-10**: **Market Collapse Continues**\n\nThe Dow continues to tumble, closing below 10,000 for the first time in years. By Oct. 10, it would bottom at 7,882, reflecting severe investor uncertainty and panic.\n\nU.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders were hastily gathered at the summit to address the 2008 financial crisis.\n\nMatthew Cavanaugh \/ Getty Images\n\n**Late 2008 – Early 2009: Federal Reserve Lowers Interest Rates to Near Zero**\n\nTo stimulate the economy, the Federal Reserve reduces interest rates, aiming to improve borrowing conditions for businesses and individuals.\n\n### 0\\.16%\nThe U.S. Federal Reserve's key interest rate was 5.26% in mid-2007. By the end of 2008, it was 0.16%.30\n\n**March 2009: Market Bottoms Out**\n\nThe S\\&P 500 reaches its lowest point at 676.53. This signals the lowest point of the crisis, with gradual recovery beginning thereafter because of government intervention and market adjustments.\n\n**2009-2010: Dodd-Frank Wall Street Reform and Consumer Protection Act**\n\nA series of post-crisis regulatory reforms begins. The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced to overhaul financial regulation, aimed to reduce risks in the financial system, increase transparency, and protect consumers from unfair lending practices.\n\n## Long-Term Impacts of the 2008 Crisis\nThe 2008 financial crisis didn't just disappear when the stock market finally hit bottom. Its effects rippled through the American economy for years, fundamentally changing how banks operate, how homes are bought and sold, and how the government regulates Wall Street.\n\nThe human toll was staggering. According to data from the U.S. Federal Reserve, by 2010, over 8.7 million American jobs had vanished. Nearly 10 million families lost their homes to foreclosure. The average U.S. household lost about \\$30,000 in home value and \\$70,000 in stock wealth. The unemployment rate peaked at 10% in October 2009, and many workers who lost jobs during this period never fully recovered their earning potential.313233\n\nThe government's response reshaped the financial industry. Dodd-Frank introduced the most sweeping changes to financial regulation since the Great Depression. The law created the Consumer Financial Protection Bureau to guard against predatory lending practices, required banks to maintain larger cash reserves, and implemented the \"[Volcker Rule](https:\/\/www.investopedia.com\/terms\/v\/volcker-rule.asp),\" limiting banks' ability to make risky investments with customer deposits.\n\nBanks now face stricter oversight and must undergo regular \"stress tests\" to prove they could survive economic shocks. Mortgage lenders must verify borrowers' ability to repay loans. However, new financial innovations and the continued growth of \"[shadow banking](https:\/\/www.investopedia.com\/terms\/s\/shadow-banking-system.asp)\"—financial services provided by nonbank institutions—suggest that while the next crisis might not look exactly like 2008, the potential for financial instability remains.\n\n## What Caused the Financial Crisis of 2008?\nThe growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of \"toxic\" assets, the collapse of home prices, and more contributed to the financial crisis of 2008.\n\n## How Much Did Housing Prices Drop in 2008?\nFrom July 2006 to January 2009, the national median house price dropped by 29%.34\n\n## How Long Did the 2008 Housing Market Crisis Last?\nDifferent geographic areas recovered at different speeds. However, in general, the recovery began in 2011, more than three years after the housing crisis began. Home prices had fully recovered by 2012.35\n## The Bottom Line\nThe 2008 financial crisis serves as a stark reminder that financial innovation without proper oversight can have devastating consequences. What began with a housing bubble and risky mortgage lending practices escalated into a global financial meltdown through complex financial products and inadequate regulation.\n\nWhile new safeguards and regulations make an exact repeat of 2008 less likely, the crisis offers enduring lessons about the dangers of excessive risk-taking, the importance of transparency in financial markets, and the interconnected nature of global finance. Perhaps most importantly, it demonstrates how problems in seemingly isolated market segments can quickly spread to threaten the entire financial system, affecting everyone from Wall Street bankers to Main Street homeowners.","meta_canonical":null,"ml_categories_json":"{\"\/Finance\":992,\"\/Finance\/Investing\":929,\"\/Finance\/Investing\/Stocks_and_Bonds\":895}","ml_types_json":"{\"\/Article\":999,\"\/Article\/News_Update\":746}","ml_intent_types_json":"{\"Informational\":999}","meta_language":"en","attrs_author":null,"attrs_publish_time":0,"attrs_original_publish_time":1510779977,"attrs_is_republished":0,"attrs_nr_words":"5231","attrs_boilerpipe_nr_words":"3819","body_ext_links_number":62,"body_int_links_number":159,"meta_nofollow":0,"meta_noarchive":1,"props_was_rendered":1,"src_redirect":"","download_time_msec":294,"download_ttfb_msec":195,"download_size":132150}

3. Robots.txt Check

Query:

Response:

4. Spam/Ban Check

Query:

Response:

5. Seen Status Check

ℹ️ Skipped - page is already crawled

📄

INDEXABLE

✅

CRAWLED

3 hours ago

🤖

ROBOTS ALLOWED

Page Info Filters

Filter	Status	Condition	Details
HTTP status	PASS	`download_http_code = 200`	HTTP 200
Age cutoff	PASS	`download_stamp > now() - 6 MONTH`	0 months ago
History drop	PASS	`isNull(history_drop_reason)`	No drop reason
Spam/ban	PASS	`fh_dont_index != 1 AND ml_spam_score = 0`	ml_spam_score=0
Canonical	PASS	`meta_canonical IS NULL OR = '' OR = src_unparsed`	Not set

Page Details

Property

Value

URL

https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp

Last Crawled

2026-04-24 18:05:21 (3 hours ago)

First Indexed

2017-11-15 21:06:17 (8 years ago)

HTTP Status Code

200

Content

Meta Title

Unraveling the 2008 Stock Market Crash: Causes and Aftermath

Meta Description

Learn how risky financial practices led to the 2008 stock market crash, reshaping U.S. financial markets and impacting global economies. Learn about the reforms that followed.

Meta Canonical

null

Boilerpipe Text

Key Takeaways The 2008 financial crisis was driven by risky mortgage lending, complex financial instruments like MBS, and inadequate regulation. Credit default swaps (CDS) exacerbated the crisis, as these unregulated financial products failed in the collapsing housing market. The crisis resulted in the Dodd-Frank Act, aimed at increasing regulation and preventing future financial collapses. U.S. economic devastation included a $16 trillion loss in household net worth and unprecedented reforms. Despite safeguards, markets face risks from new financial products like derivatives and shadow banking systems. Get personalized, AI-powered answers built on 27+ years of trusted expertise. The 2008 financial crisis was primarily triggered by the collapse of the housing bubble, leading to the worst economic downturn since the Great Depression. The crisis began years earlier as risky financial practices grew unchecked, creating a housing bubble that eventually burst, causing billions in global economic losses. Key factors included subprime mortgage lending, risky financial products, and regulatory failures. Many Americans recall watching in horror as the Dow Jones Industrial Average plummeted nearly 780 points in a single day in October of that year, then its biggest one-day drop in history. The seeds of the crisis would cost the global economy more than $2 trillion of economic growth. Key Factors Leading to the 2008 Stock Market Collapse The story of the 2008 stock market crash is more than just numbers on a screen or complex financial instruments. It's about homeowners who lost everything when their adjustable-rate mortgages suddenly jumped beyond what they could afford, retirees who had their life savings cut in half, and workers who lost jobs as businesses shuttered in the subsequent Great Recession . Understanding how this crisis unfolded isn't just about learning history—it's about recognizing warning signs that could prevent future financial disasters. Here’s a breakdown of the main factors behind the crash. 1. The Housing Bubble and the Role of Subprime Mortgages The crisis began with a housing bubble, fueled by years of ultra-low interest rates and an increased availability of mortgages. Financial institutions offered “subprime” mortgages to people with low creditworthiness, often with little or no income verification. These high-risk loans, initially affordable because of low introductory rates, became unmanageable when interest rates adjusted upward, causing many borrowers to default. Throughout the 1990s and early 2000s, the government encouraged homeownership and supported policies that enabled lenders to offer mortgages to more people, including those with low credit scores. Policies like the Community Reinvestment Act (1977) were often blamed for the crisis, but it’s more accurate to say that the private sector took these policies and ran with them by loosening credit standards and pursuing aggressive lending practices to profit from and prop up the housing boom. 1 2 2. Securitization: The Impact of Mortgage-Backed Securities Financial institutions pooled these risky subprime loans into mortgage-backed securities (MBS) and sold them to investors worldwide. MBSs were complex financial products that appeared to offer high returns with low risk, because of the presumed diversification of underlying assets. However, as housing prices fell and defaults increased, the value of these securities plummeted, creating a ripple effect across the financial system. 3. Credit Default Swaps: Risks and Derivatives To further “protect” against potential losses on MBS, banks and investors turned to credit default swaps, a form of insurance on these securities. Thus, another popular investment vehicle during this period became a credit derivative, the credit default swap (CDS) . CDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was largely unregulated. This meant that there was no requirement that the issuers of CDS contracts maintain enough money in their reserves to pay out under a worst-case scenario (such as an economic downturn). In early 2008, this spelled potential disaster for American International Group, Inc. (AIG), one of the nation's leading financial companies, when it couldn't meet claims and announced huge losses in its portfolio of underwritten CDS contracts. 3 4 4. The Dangers of Adjustable-Rate Mortgages Among the most potentially harmful of the mortgages offered to subprime borrowers were the interest-only ARM and the payment option ARM. Both were adjustable-rate mortgages. These mortgages allow the borrower to make much lower initial payments than would be due under a fixed-rate mortgage. After a period of time, often only two or three years, these ARMs reset, often at higher rates. The payments then fluctuate as frequently as monthly, sometimes resulting in much larger payments than those the borrower paid initially. In the up-trending market (and growing housing bubble) that existed in the early 2000s, these mortgages were thought to be virtually risk-free. Borrowers could end up with positive equity despite their low mortgage payments because their homes had increased in value since the purchase date. If they couldn't afford the higher payments after their mortgage rates reset, they could simply sell the homes for a profit. 5. Escalating Consumer Debt: A Crisis Catalyst To compound the potential mortgage risk, total consumer debt , in general, continued to grow at an astonishing rate. In 2004, consumer debt hit $2 trillion for the first time, meaning it doubled in less than 10 years. 5 6. How Regulatory Oversight Changes Fueled the Crisis The years leading up to the 2008 financial crisis were marked by significant regulatory and legal changes that reduced oversight and fueled risk-taking in the financial industry. Here are some key changes from the 1980s through the early 2000s that helped set the stage for the crisis: 1982: The Garn-St. Germain Depository Institutions Act This act deregulated the savings and loan industry, allowing institutions to expand into new types of lending, such as adjustable-rate mortgages. It was intended to help struggling banks but led to riskier lending practices. The act is sometimes credited with setting a precedent for financial deregulation that would continue through the 1980s and beyond. 1994: The Riegle-Neal Interstate Banking and Branching Efficiency Act This act removed barriers for banks to operate across state lines, facilitating the growth of large, national banks. While this helped banks diversify, it also contributed to the consolidation of banking power, allowing institutions to become “ too big to fail ” and increasing systemic risk across the financial system. 1999: The Gramm-Leach-Bliley Act (GLBA) GLBA , also known as the Financial Services Modernization Act, repealed major parts of the Glass-Steagall Act of 1933, which had previously separated commercial banking from investment banking. By allowing banks to merge with securities and insurance companies, GLBA paved the way for “universal banks” that engaged in a wide range of financial services, including risky investments. This increase in complexity and interconnectedness heightened the risk of a widespread financial collapse. 2000: The Commodity Futures Modernization Act (CFMA) The CFMA removed many regulations from derivatives trading, including credit default swaps (CDS), a key factor in the 2008 financial crisis. By exempting CDS and other complex derivatives from regulation, the act allowed institutions to take on massive risks, which compounded losses when defaults on subprime loans increased. The lack of oversight meant that companies like AIG could issue large amounts of CDS with minimal capital reserves to cover potential losses. Shift to “Light-Touch” Regulation in the 2000s The 2000s were marked by an overall shift toward “light-touch” regulation, especially within agencies like the SEC. The focus was on allowing financial markets to self-regulate and emphasizing innovation over caution. This attitude led to minimal oversight of mortgage-backed securities and collateralized debt obligations (CDOs) that bundled subprime loans, which ultimately proliferated risk throughout the system. 2004: SEC’s Net Capital Rule Change In 2004, the Securities and Exchange Commission (SEC) allowed major investment banks to increase their leverage ratios significantly, meaning they could borrow much more relative to their capital. Previously, banks had been limited to a leverage ratio of 12 to one, but the new rule allowed ratios as high as 30 to one or even 40 to one. 6 This change enabled banks to take on enormous risks by financing long-term assets with short-term debt, increasing their vulnerability to any market downturn. 7 8 7. Fannie Mae and Freddie Mac's Involvement In the wake of the crash, many of those who backed the deregulatory efforts of the previous years were intent on blaming two government-sponsored enterprises, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), for the crisis. 9 10 11 Here’s a look at their involvement and why they’re often mentioned in discussions about the crash: Role in the Housing Market Fannie Mae and Freddie Mac were created to promote homeownership by buying mortgages from lenders, packaging them into securities, and selling them to investors. This helped lenders free up capital to issue more loans, thus increasing homeownership. By the 2000s, both entities were heavily involved in purchasing mortgages, including riskier subprime loans, from the private market. Increased Risk-Taking in the Early 2000s Under pressure from both political and market forces to expand homeownership, Fannie and Freddie increasingly purchased subprime and alt-A loans (those with limited documentation or low credit quality). Although they initially held stricter underwriting standards than private lenders, Fannie and Freddie relaxed their criteria to compete with private institutions benefiting from the booming housing market. Securitization of Risky Mortgages Like private banks, Fannie and Freddie pooled mortgages into mortgage-backed securities and sold them to investors. While they maintained guarantees on some of these securities, they held significant exposure to the housing market. When housing prices fell, and foreclosures surged, Fannie and Freddie suffered substantial losses, needing a federal bailout in 2008 to prevent collapse. Their financial distress contributed to the crisis’s depth but did not initiate it. Private Market Influence Much of the riskiest lending during the housing bubble came from private lenders who issued subprime mortgages with even lower standards than those of Fannie and Freddie. These private institutions created their own MBSs, often without the oversight or implied government backing that Fannie and Freddie had. This private-market securitization, which exploded in the early 2000s, exposed the financial system to unmanageable levels of risk and was a core driver of the crisis. Systemic Impact, Not Direct Cause Fannie and Freddie were caught in the wave of broader housing market speculation and lending practices but didn’t drive the most extreme forms of subprime lending. Buying riskier loans contributed to inflating the housing bubble and increasing overall exposure to the housing market’s downturn, which worsened the crisis when it arrived. However, private lenders and Wall Street banks were primarily responsible for the riskiest practices and highest volumes of subprime loans. 8. The Collapse of Wall Street Giants The most proximate cause (the last domino to fall, as it were) of the crisis was the collapse of storied institutions at the heart of Wall Street. As mortgage defaults rose, financial giants holding large amounts of MBS, such as Lehman Brothers, faced mounting losses and liquidity crises. Lehman’s bankruptcy in 2008 triggered widespread panic, as it demonstrated that even major institutions could collapse. This eroded investor confidence globally, froze credit markets, and led to widespread economic distress. $150 billion The amount of bailout money AIG received from the U.S. federal government in 2008, which the company repaid with interest by 2013. 3 Timeline of the 2008 Stock Market Crash April 2, 2007: Major Subprime Lender Goes Under New Century Financial Corporation, a leading subprime mortgage lender, files for bankruptcy. 12 July 31, 2007: Bear Stearns Files for Bankruptcy Bear Stearns goes under , drowned in a sea of massive losses resulting from underwriting many of the investment vehicles linked to the subprime mortgage market. 13 14 Oct. 9, 2007: Stock Market Peak It was soon obvious to all that the market was in trouble, and a subprime mortgage crisis was looming. Homeowners defaulted at high rates as the creative variations of subprime mortgages reset to higher payments as home prices declined. Many homeowners reported being "upside down"—they owed more on their mortgages than their homes were worth—and could no longer flip them to make themselves whole. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. The subprime meltdown was taking its toll on homeowners and the real estate market. Despite this apparent mess, the financial markets continued higher into October 2007, with the Dow reaching a closing high of 14,164 on Oct. 9. December 2007: U.S. Enters Recession The turmoil eventually caught up, and by December 2007 the United States had fallen into a recession . Officially declared later, the U.S. economy was on the precipice as consumer spending fell, debts were being defaulted on, and unemployment was rising. March 2008: Bear Stearns Acquired by JPMorgan Chase In a government-brokered deal, Bear Stearns is sold to JPMorgan & Chase & Co. ( JPM ) for a fraction of its former value. The U.S. Federal Reserve 15 stepped in with emergency funding to ensure the deal closed, aiming to prevent wider panic. July 2008: IndyMac Bank Fails By early July 2008, the Dow Jones Industrial Average would trade below 11,000 for the first time in over two years. 16 That would not be the end of the decline. IndyMac, a major mortgage lender, collapses under the weight of loan defaults. Its failure becomes one of the largest bank failures in U.S. history, prompting intervention by the Federal Deposit Insurance Corporation (FDIC). 15 It won't be the last lender to collapse. Fast Fact Many borrowers who obtained adjustable-rate subprime mortgages with low initial rates received no information from lenders about the details of such loans and found themselves trapped with unaffordable loan obligations when rates rose. 17 Sept. 6, 2008: Federal Takeover of Fannie Mae and Freddie Mac With the financial markets down almost 20% from their October 2007 peaks, the government announces its takeover of Fannie Mae and Freddie Mac . This was a necessary step because of losses from heavy exposure to the collapsing subprime mortgage market. 18 Newly former employees of the bankrupt Lehman Brothers hug outside its offices in Manhattan, New York, Sept. 15, 2018. Nicholas Roberts / Getty Images Sept. 15, 2008: Lehman Brothers Declares Bankruptcy One week later, major investment banking firm Lehman Brothers succumbed to its overexposure to the subprime mortgage market. It announced the largest bankruptcy filing in U.S. history at that time. 19 20 The next day, markets plummeted, and the Dow closed down 499 points at 10,917. Sept. 16, 2008: The " Buck Breaks , " AIG Receives Bailout, Panic Spreads, the Fed Lowers Fed Funds Rate Things now begin moving very quickly. The collapse of Lehman caused the net asset value ( NAV ) of the Reserve Primary Fund to fall below $1 per share on Sept. 16, 2008. Investors were told that for every $1 invested, they were entitled to 97 cents. Given the staggering losses all around, this might appear insignificant—far from it. The Reserve Primary Fund was a prominent money market fund, one of the oldest in the U.S. and long considered a stable, low-risk investment vehicle. Money market funds like the Reserve Primary Fund are typically seen as safe places to park cash, as they invest in high-quality, short-term debt such as commercial paper. They aim to maintain a stable NAV of $1 per share, giving investors predictable returns with minimal risk. However, the Reserve Primary Fund had invested in commercial paper issued by Lehman Brothers, a financial giant with significant exposure to subprime mortgage assets. When Lehman Brothers declared bankruptcy, the value of its commercial paper held by the Reserve Primary Fund suddenly dropped to near zero. This was the first time since the 1994 failure of a small money market fund that a major fund had “broken the buck.” Breaking the buck sent shock waves through the financial system. Money market funds were widely used by individuals, institutions, and corporations as a safe place for short-term cash. The loss of stability in such a trusted asset class caused immediate panic, leading investors to redeem their holdings en masse across the industry, fearing similar losses in other funds. Panic breaks out in the money market fund industry, resulting in massive redemption requests. The same day, Bank of America ( BAC ) announced it was buying Merrill Lynch, the nation's largest brokerage company. 20 In addition, the credit rating for AIG is downgraded because of the credit derivative contracts they'd underwritten. AIG, facing insolvency because of losses on credit default swaps, receives an $85 billion government bailout to prevent further destabilization of the financial system. 21 Finally, on this busy day, the U.S. Federal Reserve announces it would maintain its federal funds rate at 2.0%. 22 Sept. 17, 2008: SEC Bans Short Selling on Financial Sector Firms The SEC initiates a temporary ban on short selling financial company stocks to help stabilize the markets. 23 The markets surged on the news, and investors sent the Dow up 456 points to an intraday high of 11,483, closing up 361 at 11,388. Sept. 18, 2008: Bailout Talks Begin Treasury Secretary Henry Paulson proposes the Troubled Asset Relief Program ( TARP ) to buy up to $700 billion in toxic assets from banks to stabilize the financial sector. The news sends the Dow up 410 points. 24 25 For investors, those highs will be like the last gasp of air when a roller coaster climbs to its greatest height and is about to drop. 21 A protestor stands outside Bear Stearns headquarters March 26, 2008, in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. Chris Hondros / Getty Images Sept. 19, 2008: The U.S. Treasury Announces a Temporary Guarantee for Money Market Funds In response to Reserve Primary Fund breaking the buck, the U.S. government quickly took steps to stabilize money markets, aiming to restore investor confidence and prevent further runs on these funds. Sept. 21, 2008: GS and MS Shift to Holding Companies Goldman Sachs Inc. ( GS ) and Morgan Stanley ( MS ), the last two of the major investment banks still standing, converted from investment banks to bank holding companies to be able to obtain bailout funding. 26 Sept. 25, 2008: Washington Mutual Fails After a 10-day bank run , the FDIC seizes Washington Mutual, then the nation's largest savings and loan and one heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase. 27 Sept. 29, 2008: Massive Market Decline The Dow declined 774 points (6.98%), at the time the largest one-day point drop in history. 28 Oct. 3, 2008: TARP Passes A reworked $700 billion TARP plan, renamed the Emergency Economic Stabilization Act of 2008 , passed with a bipartisan vote in Congress. 29 Oct. 6-10 : Market Collapse Continues The Dow continues to tumble, closing below 10,000 for the first time in years. By Oct. 10, it would bottom at 7,882, reflecting severe investor uncertainty and panic. U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders were hastily gathered at the summit to address the 2008 financial crisis. Matthew Cavanaugh / Getty Images Late 2008 – Early 2009: Federal Reserve Lowers Interest Rates to Near Zero To stimulate the economy, the Federal Reserve reduces interest rates, aiming to improve borrowing conditions for businesses and individuals. 0.16% The U.S. Federal Reserve's key interest rate was 5.26% in mid-2007. By the end of 2008, it was 0.16%. 30 March 2009: Market Bottoms Out The S&P 500 reaches its lowest point at 676.53. This signals the lowest point of the crisis, with gradual recovery beginning thereafter because of government intervention and market adjustments. 2009-2010: Dodd-Frank Wall Street Reform and Consumer Protection Act A series of post-crisis regulatory reforms begins. The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced to overhaul financial regulation, aimed to reduce risks in the financial system, increase transparency, and protect consumers from unfair lending practices. Long-Term Impacts of the 2008 Crisis The 2008 financial crisis didn't just disappear when the stock market finally hit bottom. Its effects rippled through the American economy for years, fundamentally changing how banks operate, how homes are bought and sold, and how the government regulates Wall Street. The human toll was staggering. According to data from the U.S. Federal Reserve, by 2010, over 8.7 million American jobs had vanished. Nearly 10 million families lost their homes to foreclosure. The average U.S. household lost about $30,000 in home value and $70,000 in stock wealth. The unemployment rate peaked at 10% in October 2009, and many workers who lost jobs during this period never fully recovered their earning potential. 31 32 33 The government's response reshaped the financial industry. Dodd-Frank introduced the most sweeping changes to financial regulation since the Great Depression. The law created the Consumer Financial Protection Bureau to guard against predatory lending practices, required banks to maintain larger cash reserves, and implemented the " Volcker Rule ," limiting banks' ability to make risky investments with customer deposits. Banks now face stricter oversight and must undergo regular "stress tests" to prove they could survive economic shocks. Mortgage lenders must verify borrowers' ability to repay loans. However, new financial innovations and the continued growth of " shadow banking "—financial services provided by nonbank institutions—suggest that while the next crisis might not look exactly like 2008, the potential for financial instability remains. What Caused the Financial Crisis of 2008? The growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of "toxic" assets, the collapse of home prices, and more contributed to the financial crisis of 2008. How Much Did Housing Prices Drop in 2008? From July 2006 to January 2009, the national median house price dropped by 29%. 34 How Long Did the 2008 Housing Market Crisis Last? Different geographic areas recovered at different speeds. However, in general, the recovery began in 2011, more than three years after the housing crisis began. Home prices had fully recovered by 2012. 35 The Bottom Line The 2008 financial crisis serves as a stark reminder that financial innovation without proper oversight can have devastating consequences. What began with a housing bubble and risky mortgage lending practices escalated into a global financial meltdown through complex financial products and inadequate regulation. While new safeguards and regulations make an exact repeat of 2008 less likely, the crisis offers enduring lessons about the dangers of excessive risk-taking, the importance of transparency in financial markets, and the interconnected nature of global finance. Perhaps most importantly, it demonstrates how problems in seemingly isolated market segments can quickly spread to threaten the entire financial system, affecting everyone from Wall Street bankers to Main Street homeowners.

Markdown

[Skip to content](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp#main) [Investopedia](https://www.investopedia.com/) [Live](https://www.investopedia.com/stock-market-today-dow-jones-s-and-p-500-04242026-11957748) - Please fill out this field. - [Newsletters](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp) Please fill out this field. - [News](https://www.investopedia.com/news-4427706) News - [Markets](https://www.investopedia.com/markets-news-4427704) - [Companies](https://www.investopedia.com/company-news-4427705) - [Earnings](https://www.investopedia.com/earnings-reports-5218419) - [CD Rates](https://www.investopedia.com/certificates-deposit-news-7111770) - [Mortgage Rates](https://www.investopedia.com/mortgage-rates-5184598) - [Economy](https://www.investopedia.com/economic-news-5218422) - [Government](https://www.investopedia.com/political-news-4689737) - [Crypto](https://www.investopedia.com/cryptocurrency-news-5114163) - [Live Markets News](https://www.investopedia.com/live-markets-news-11713202) - [Personal Finance](https://www.investopedia.com/personal-finance-news-5114159) - [View All](https://www.investopedia.com/news-4427706) - [Investing](https://www.investopedia.com/investing-4427685) Investing - [Stocks](https://www.investopedia.com/stocks-4427785) - [Cryptocurrency](https://www.investopedia.com/cryptocurrency-4427699) - [Bonds](https://www.investopedia.com/bonds-4689778) - [ETFs](https://www.investopedia.com/etfs-4427784) - [Options and Derivatives](https://www.investopedia.com/options-and-derivatives-trading-4689663) - [Commodities](https://www.investopedia.com/commodities-4427780) - [Trading](https://www.investopedia.com/trading-4427765) - [Automated Investing](https://www.investopedia.com/financial-technology-and-automated-investing-4689759) - [Brokers](https://www.investopedia.com/brokers-4689772) - [Fundamental Analysis](https://www.investopedia.com/fundamental-analysis-4689757) - [View All](https://www.investopedia.com/investing-4427685) - [Simulator](https://www.investopedia.com/simulator/?inv_to_sim=global_nav) Simulator - [Login / Portfolio](https://www.investopedia.com/simulator/portfolio) - [Trade](https://www.investopedia.com/simulator/trade/stocks) - [Research](https://www.investopedia.com/simulator/research) - [My Games](https://www.investopedia.com/simulator/games/my-games) - [Leaderboard](https://www.investopedia.com/simulator/games) - [Banking](https://www.investopedia.com/banking-4427754) Banking - [Savings Accounts](https://www.investopedia.com/savings-accounts-4689728) - [Certificates of Deposit (CDs)](https://www.investopedia.com/certificate-of-deposits-4689733) - [Money Market Accounts](https://www.investopedia.com/money-market-account-4689730) - [Checking Accounts](https://www.investopedia.com/checking-accounts-4689732) - [View All](https://www.investopedia.com/banking-4427754) - [Personal Finance](https://www.investopedia.com/personal-finance-4427760) Personal Finance - [Budgeting and Saving](https://www.investopedia.com/budgeting-and-savings-4427755) - [Personal Loans](https://www.investopedia.com/personal-loans-4689729) - [Insurance](https://www.investopedia.com/insurance-4427716) - [Mortgages](https://www.investopedia.com/mortgage-4689703) - [Credit and Debt](https://www.investopedia.com/credit-and-debt-4689724) - [Student Loans](https://www.investopedia.com/student-loans-4689727) - [Taxes](https://www.investopedia.com/taxes-4427724) - [Credit Cards](https://www.investopedia.com/credit-card-4689721) - [Financial Literacy](https://www.investopedia.com/financial-literacy-resource-center-7151950) - [Retirement](https://www.investopedia.com/retirement-planning-4689695) - [View All](https://www.investopedia.com/personal-finance-4427760) - [Economy](https://www.investopedia.com/economy-4689801) Economy - [Government and Policy](https://www.investopedia.com/government-and-policy-4689793) - [Monetary Policy](https://www.investopedia.com/monetary-policy-4689792) - [Fiscal Policy](https://www.investopedia.com/fiscal-policy-4689796) - [Economics](https://www.investopedia.com/economics-4689800) - [View All](https://www.investopedia.com/economy-4689801) - [Reviews](https://www.investopedia.com/financial-product-reviews-7110783) Reviews - [Best Online Brokers](https://www.investopedia.com/best-online-brokers-4587872) - [Best Crypto Exchanges](https://www.investopedia.com/best-crypto-exchanges-5071855) - [Best Savings Rates](https://www.investopedia.com/high-yield-savings-accounts-4770633) - [Best CD Rates](https://www.investopedia.com/best-cd-rates-4770214) - [Best Life Insurance](https://www.investopedia.com/the-best-life-insurance-companies-8763666) - [Best Mortgage Rates](https://www.investopedia.com/mortgage-rates-5094943) - [Best Robo-Advisors](https://www.investopedia.com/the-best-robo-advisors-8764849) - [Best Personal Loans](https://www.investopedia.com/the-best-personal-loans-8761582) - [Best Debt Relief Companies](https://www.investopedia.com/the-best-debt-relief-companies-8763179) - [View All](https://www.investopedia.com/financial-product-reviews-7110783) - [Newsletters](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp) Follow Us - [News](https://www.investopedia.com/news-4427706) - [Markets](https://www.investopedia.com/markets-news-4427704) - [Companies](https://www.investopedia.com/company-news-4427705) - [Earnings](https://www.investopedia.com/earnings-reports-5218419) - [CD Rates](https://www.investopedia.com/certificates-deposit-news-7111770) - [Mortgage Rates](https://www.investopedia.com/mortgage-rates-5184598) - [Economy](https://www.investopedia.com/economic-news-5218422) - [Government](https://www.investopedia.com/political-news-4689737) - [Crypto](https://www.investopedia.com/cryptocurrency-news-5114163) - [Live Markets News](https://www.investopedia.com/live-markets-news-11713202) - [Personal Finance](https://www.investopedia.com/personal-finance-news-5114159) - [View All](https://www.investopedia.com/news-4427706) - [Investing](https://www.investopedia.com/investing-4427685) - [Stocks](https://www.investopedia.com/stocks-4427785) - [Cryptocurrency](https://www.investopedia.com/cryptocurrency-4427699) - [Bonds](https://www.investopedia.com/bonds-4689778) - [ETFs](https://www.investopedia.com/etfs-4427784) - [Options and Derivatives](https://www.investopedia.com/options-and-derivatives-trading-4689663) - [Commodities](https://www.investopedia.com/commodities-4427780) - [Trading](https://www.investopedia.com/trading-4427765) - [Automated Investing](https://www.investopedia.com/financial-technology-and-automated-investing-4689759) - [Brokers](https://www.investopedia.com/brokers-4689772) - [Fundamental Analysis](https://www.investopedia.com/fundamental-analysis-4689757) - [View All](https://www.investopedia.com/investing-4427685) - [Simulator](https://www.investopedia.com/simulator/?inv_to_sim=global_nav) - [Login / Portfolio](https://www.investopedia.com/simulator/portfolio) - [Trade](https://www.investopedia.com/simulator/trade/stocks) - [Research](https://www.investopedia.com/simulator/research) - [My Games](https://www.investopedia.com/simulator/games/my-games) - [Leaderboard](https://www.investopedia.com/simulator/games) - [Banking](https://www.investopedia.com/banking-4427754) - [Savings Accounts](https://www.investopedia.com/savings-accounts-4689728) - [Certificates of Deposit (CDs)](https://www.investopedia.com/certificate-of-deposits-4689733) - [Money Market Accounts](https://www.investopedia.com/money-market-account-4689730) - [Checking Accounts](https://www.investopedia.com/checking-accounts-4689732) - [View All](https://www.investopedia.com/banking-4427754) - [Personal Finance](https://www.investopedia.com/personal-finance-4427760) - [Budgeting and Saving](https://www.investopedia.com/budgeting-and-savings-4427755) - [Personal Loans](https://www.investopedia.com/personal-loans-4689729) - [Insurance](https://www.investopedia.com/insurance-4427716) - [Mortgages](https://www.investopedia.com/mortgage-4689703) - [Credit and Debt](https://www.investopedia.com/credit-and-debt-4689724) - [Student Loans](https://www.investopedia.com/student-loans-4689727) - [Taxes](https://www.investopedia.com/taxes-4427724) - [Credit Cards](https://www.investopedia.com/credit-card-4689721) - [Financial Literacy](https://www.investopedia.com/financial-literacy-resource-center-7151950) - [Retirement](https://www.investopedia.com/retirement-planning-4689695) - [View All](https://www.investopedia.com/personal-finance-4427760) - [Economy](https://www.investopedia.com/economy-4689801) - [Government and Policy](https://www.investopedia.com/government-and-policy-4689793) - [Monetary Policy](https://www.investopedia.com/monetary-policy-4689792) - [Fiscal Policy](https://www.investopedia.com/fiscal-policy-4689796) - [Economics](https://www.investopedia.com/economics-4689800) - [View All](https://www.investopedia.com/economy-4689801) - [Reviews](https://www.investopedia.com/financial-product-reviews-7110783) - [Best Online Brokers](https://www.investopedia.com/best-online-brokers-4587872) - [Best Crypto Exchanges](https://www.investopedia.com/best-crypto-exchanges-5071855) - [Best Savings Rates](https://www.investopedia.com/high-yield-savings-accounts-4770633) - [Best CD Rates](https://www.investopedia.com/best-cd-rates-4770214) - [Best Life Insurance](https://www.investopedia.com/the-best-life-insurance-companies-8763666) - [Best Mortgage Rates](https://www.investopedia.com/mortgage-rates-5094943) - [Best Robo-Advisors](https://www.investopedia.com/the-best-robo-advisors-8764849) - [Best Personal Loans](https://www.investopedia.com/the-best-personal-loans-8761582) - [Best Debt Relief Companies](https://www.investopedia.com/the-best-debt-relief-companies-8763179) - [View All](https://www.investopedia.com/financial-product-reviews-7110783) - Top Stories - [How Much Do Americans Spend in Their 30s?](https://www.investopedia.com/how-much-do-americans-spend-in-their-30s-national-data-reveals-key-expenses-driving-household-budgets-11951214) - [How the Cost of Living Ranks in Every State](https://www.investopedia.com/how-the-cost-of-living-ranks-in-every-state-and-what-drives-the-big-differences-11951215) - [What Happens to Your 401(k) When You Die?](https://www.investopedia.com/what-happens-to-your-401-k-when-you-die-1776346226965-11951211) - [3 Safe Ways to Earn 5% or Better](https://www.investopedia.com/dont-let-usd5000-sit-idle-3-safe-ways-to-earn-5-or-better-11957399) Table of Contents Expand Table of Contents - [Key Factors](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp#toc-key-factors-leading-to-the-2008-stock-market-collapse) - [The Timeline](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp#toc-timeline-of-the-2008-stock-market-crash) - [Long-Term Impacts](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp#toc-long-term-impacts-of-the-2008-crisis) - [FAQs](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp#toc-what-caused-the-financial-crisis-of-2008) - [The Bottom Line](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp#toc-the-bottom-line) # Unraveling the 2008 Stock Market Crash: Causes and Aftermath Explore the Causes and Events at the Heart of the Financial Crisis By [Peter Gratton](https://www.investopedia.com/peter-gratton-7968386) ![Peter Gratton portrait]() ![Peter Gratton portrait](https://www.investopedia.com/thmb/Tx-Ks42pE2ZOzQzV-QuIWtsDGHw=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/PGphotobestversion-c7f87d2cc1ef41459cf33551c7bd3530.jpg) [Full Bio](https://www.investopedia.com/peter-gratton-7968386) Peter Gratton, Ph.D., is a New Orleans-based editor and professor with over 20 years of experience in investing, economics, and public policy. Peter began covering markets at Multex (Reuters) and has expanded his coverage to include investments, ethics, public policy, and the health and travel industries. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Updated December 23, 2025 Reviewed by [Julius Mansa](https://www.investopedia.com/julius-mansa-4799781) Fact checked by [Vikki Velasquez](https://www.investopedia.com/vikki-velasquez-5198872) ![Vikkie Velasquez]() ![Vikkie Velasquez](https://www.investopedia.com/thmb/qsiqwN4603qvBBcEmwBBFAZ7h-8=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg) Fact checked by Vikki Velasquez [Full Bio](https://www.investopedia.com/vikki-velasquez-5198872) Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) ![ trader looks on during a trading session on the floor of Frankfurt stock exchange on September 30, 2008 in Frankfurt am Main, Germany.](https://www.investopedia.com/thmb/NaL8i1yZQenUfrM-ucfrpgOsnkk=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-83060834-4a3959904d9948e4a810eed89d2c4ab5.jpg) ![ trader looks on during a trading session on the floor of Frankfurt stock exchange on September 30, 2008 in Frankfurt am Main, Germany.](https://www.investopedia.com/thmb/NaL8i1yZQenUfrM-ucfrpgOsnkk=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-83060834-4a3959904d9948e4a810eed89d2c4ab5.jpg) Ralph Orlowski / Getty Images Close ### Key Takeaways - The 2008 financial crisis was driven by risky mortgage lending, complex financial instruments like MBS, and inadequate regulation. - Credit default swaps (CDS) exacerbated the crisis, as these unregulated financial products failed in the collapsing housing market. - The crisis resulted in the Dodd-Frank Act, aimed at increasing regulation and preventing future financial collapses. - U.S. economic devastation included a \$16 trillion loss in household net worth and unprecedented reforms. - Despite safeguards, markets face risks from new financial products like derivatives and shadow banking systems. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ASK The 2008 financial crisis was primarily triggered by the collapse of the housing bubble, leading to the worst economic downturn since the Great Depression. The crisis began years earlier as risky financial practices grew unchecked, creating a housing bubble that eventually burst, causing billions in global economic losses. Key factors included subprime mortgage lending, risky financial products, and regulatory failures. Many Americans recall watching in horror as the Dow Jones Industrial Average plummeted nearly 780 points in a single day in October of that year, then its biggest one-day drop in history. The seeds of the crisis would cost the global economy more than \$2 trillion of economic growth. ## Key Factors Leading to the 2008 Stock Market Collapse The story of the 2008 stock market crash is more than just numbers on a screen or complex financial instruments. It's about homeowners who lost everything when their [adjustable-rate mortgages](https://www.investopedia.com/terms/a/arm.asp) suddenly jumped beyond what they could afford, retirees who had their life savings cut in half, and workers who lost jobs as businesses shuttered in the subsequent [Great Recession](https://www.investopedia.com/terms/g/great-recession.asp). Understanding how this crisis unfolded isn't just about learning history—it's about recognizing warning signs that could prevent future financial disasters. Take the Next Step to Invest Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Here’s a breakdown of the main factors behind the crash. ### 1\. The Housing Bubble and the Role of Subprime Mortgages The crisis began with a housing bubble, fueled by years of ultra-low interest rates and an increased availability of mortgages. Financial institutions offered “subprime” mortgages to people with low creditworthiness, often with little or no income verification. These high-risk loans, initially affordable because of low introductory rates, became unmanageable when interest rates adjusted upward, causing many borrowers to default. Throughout the 1990s and early 2000s, the government encouraged homeownership and supported policies that enabled lenders to offer mortgages to more people, including those with low credit scores. Policies like the [Community Reinvestment Act](https://www.investopedia.com/terms/c/community_reinvestment_act.asp) (1977) were often blamed for the crisis, but it’s more accurate to say that the private sector took these policies and ran with them by loosening credit standards and pursuing aggressive lending practices to profit from and prop up the housing boom.12 ### 2\. Securitization: The Impact of Mortgage-Backed Securities Financial institutions pooled these risky subprime loans into [mortgage-backed securities (MBS)](https://www.investopedia.com/terms/m/mbs.asp) and sold them to investors worldwide. MBSs were complex financial products that appeared to offer high returns with low risk, because of the presumed diversification of underlying assets. However, as housing prices fell and defaults increased, the value of these securities plummeted, creating a ripple effect across the financial system. ### 3\. Credit Default Swaps: Risks and Derivatives To further “protect” against potential losses on MBS, banks and investors turned to credit default swaps, a form of insurance on these securities. Thus, another popular investment vehicle during this period became a credit derivative, the [credit default swap (CDS)](https://www.investopedia.com/terms/c/creditdefaultswap.asp). CDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was largely unregulated. This meant that there was no requirement that the issuers of CDS contracts maintain enough money in their reserves to pay out under a worst-case scenario (such as an economic downturn). In early 2008, this spelled potential disaster for American International Group, Inc. (AIG), one of the nation's leading financial companies, when it couldn't meet claims and announced huge losses in its portfolio of underwritten CDS contracts.34 ### 4\. The Dangers of Adjustable-Rate Mortgages Among the most potentially harmful of the mortgages offered to subprime borrowers were the [interest-only ARM](https://www.investopedia.com/terms/i/interestonlyarm.asp) and the payment option ARM. Both were adjustable-rate mortgages. These mortgages allow the borrower to make much lower initial payments than would be due under a fixed-rate mortgage. After a period of time, often only two or three years, these ARMs reset, often at higher rates. The payments then fluctuate as frequently as monthly, sometimes resulting in much larger payments than those the borrower paid initially. In the up-trending market (and growing housing bubble) that existed in the early 2000s, these mortgages were thought to be virtually risk-free. Borrowers could end up with positive equity despite their low mortgage payments because their homes had increased in value since the purchase date. If they couldn't afford the higher payments after their mortgage rates reset, they could simply sell the homes for a profit. ### 5\. Escalating Consumer Debt: A Crisis Catalyst To compound the potential mortgage risk, total [consumer debt](https://www.investopedia.com/terms/c/consumer-debt.asp), in general, continued to grow at an astonishing rate. In 2004, consumer debt hit \$2 trillion for the first time, meaning it doubled in less than 10 years.5 ### 6\. How Regulatory Oversight Changes Fueled the Crisis The years leading up to the 2008 financial crisis were marked by significant regulatory and legal changes that reduced oversight and fueled risk-taking in the financial industry. Here are some key changes from the 1980s through the early 2000s that helped set the stage for the crisis: **1982: [The Garn-St. Germain Depository Institutions Act](https://www.investopedia.com/terms/g/garn-st-germain-depository-institutions-act.asp)** This act deregulated the savings and loan industry, allowing institutions to expand into new types of lending, such as adjustable-rate mortgages. It was intended to help struggling banks but led to riskier lending practices. The act is sometimes credited with setting a precedent for financial deregulation that would continue through the 1980s and beyond. **1994: The Riegle-Neal Interstate Banking and Branching Efficiency Act** This act removed barriers for banks to operate across state lines, facilitating the growth of large, national banks. While this helped banks diversify, it also contributed to the consolidation of banking power, allowing institutions to become “[too big to fail](https://www.investopedia.com/terms/t/too-big-to-fail.asp)” and increasing systemic risk across the financial system. **1999: The Gramm-Leach-Bliley Act (GLBA)** [GLBA](https://www.investopedia.com/terms/g/glba.asp), also known as the Financial Services Modernization Act, repealed major parts of the Glass-Steagall Act of 1933, which had previously separated commercial banking from investment banking. By allowing banks to merge with securities and insurance companies, GLBA paved the way for “universal banks” that engaged in a wide range of financial services, including risky investments. This increase in complexity and interconnectedness heightened the risk of a widespread financial collapse. **2000: The Commodity Futures Modernization Act (CFMA)** The [CFMA](https://www.investopedia.com/terms/c/commodityfuturescontract.asp) removed many regulations from derivatives trading, including credit default swaps (CDS), a key factor in the 2008 financial crisis. By exempting CDS and other complex derivatives from regulation, the act allowed institutions to take on massive risks, which compounded losses when defaults on subprime loans increased. The lack of oversight meant that companies like AIG could issue large amounts of CDS with minimal capital reserves to cover potential losses. **Shift to “Light-Touch” Regulation in the 2000s** The 2000s were marked by an overall shift toward “light-touch” regulation, especially within agencies like the SEC. The focus was on allowing financial markets to self-regulate and emphasizing innovation over caution. This attitude led to minimal oversight of mortgage-backed securities and [collateralized debt obligations (CDOs)](https://www.investopedia.com/terms/c/cdo.asp) that bundled subprime loans, which ultimately proliferated risk throughout the system. **2004: SEC’s Net Capital Rule Change** In 2004, the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp) allowed major investment banks to increase their leverage ratios significantly, meaning they could borrow much more relative to their capital. Previously, banks had been limited to a leverage ratio of 12 to one, but the new rule allowed ratios as high as 30 to one or even 40 to one.6 This change enabled banks to take on enormous risks by financing long-term assets with short-term debt, increasing their vulnerability to any market downturn.78 ### 7\. Fannie Mae and Freddie Mac's Involvement In the wake of the crash, many of those who backed the deregulatory efforts of the previous years were intent on blaming two government-sponsored enterprises, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), for the crisis.91011 Here’s a look at their involvement and why they’re often mentioned in discussions about the crash: **Role in the Housing Market** Fannie Mae and Freddie Mac were created to promote homeownership by buying mortgages from lenders, packaging them into securities, and selling them to investors. This helped lenders free up capital to issue more loans, thus increasing homeownership. By the 2000s, both entities were heavily involved in purchasing mortgages, including riskier subprime loans, from the private market. **Increased Risk-Taking in the Early 2000s** Under pressure from both political and market forces to expand homeownership, Fannie and Freddie increasingly purchased subprime and [alt-A loans](https://www.investopedia.com/terms/a/alt-a.asp) (those with limited documentation or low credit quality). Although they initially held stricter underwriting standards than private lenders, Fannie and Freddie relaxed their criteria to compete with private institutions benefiting from the booming housing market. **Securitization of Risky Mortgages** Like private banks, Fannie and Freddie pooled mortgages into mortgage-backed securities and sold them to investors. While they maintained guarantees on some of these securities, they held significant exposure to the housing market. When housing prices fell, and foreclosures surged, Fannie and Freddie suffered substantial losses, needing a federal bailout in 2008 to prevent collapse. Their financial distress contributed to the crisis’s depth but did not initiate it. **Private Market Influence** Much of the riskiest lending during the housing bubble came from private lenders who issued subprime mortgages with even lower standards than those of Fannie and Freddie. These private institutions created their own MBSs, often without the oversight or implied government backing that Fannie and Freddie had. This private-market securitization, which exploded in the early 2000s, exposed the financial system to unmanageable levels of risk and was a core driver of the crisis. **Systemic Impact, Not Direct Cause** Fannie and Freddie were caught in the wave of broader housing market speculation and lending practices but didn’t drive the most extreme forms of subprime lending. Buying riskier loans contributed to inflating the housing bubble and increasing overall exposure to the housing market’s downturn, which worsened the crisis when it arrived. However, private lenders and Wall Street banks were primarily responsible for the riskiest practices and highest volumes of subprime loans. ### 8\. The Collapse of Wall Street Giants The most proximate cause (the last domino to fall, as it were) of the crisis was the collapse of storied institutions at the heart of Wall Street. As mortgage defaults rose, financial giants holding large amounts of MBS, such as Lehman Brothers, faced mounting losses and liquidity crises. Lehman’s bankruptcy in 2008 triggered widespread panic, as it demonstrated that even major institutions could collapse. This eroded investor confidence globally, froze credit markets, and led to widespread economic distress. ### \$150 billion The amount of [bailout money AIG received](https://www.investopedia.com/articles/economics/09/american-investment-group-aig-bailout.asp) from the U.S. federal government in 2008, which the company repaid with interest by 2013.3 ## Timeline of the 2008 Stock Market Crash **April 2, 2007: Major Subprime Lender Goes Under** New Century Financial Corporation, a leading subprime mortgage lender, files for bankruptcy.12 **July 31, 2007: Bear Stearns Files for Bankruptcy** [Bear Stearns goes under](https://www.investopedia.com/articles/07/bear-stearns-collapse.asp), drowned in a sea of massive losses resulting from underwriting many of the investment vehicles linked to the subprime mortgage market.1314 **Oct. 9, 2007: Stock Market Peak** It was soon obvious to all that the market was in trouble, and a subprime mortgage crisis was looming. Homeowners defaulted at high rates as the creative variations of subprime mortgages reset to higher payments as home prices declined. Many homeowners reported being "upside down"—they owed more on their mortgages than their homes were worth—and could no longer flip them to make themselves whole. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. The [subprime meltdown](https://www.investopedia.com/articles/07/subprime-overview.asp) was taking its toll on homeowners and the real estate market. Despite this apparent mess, the financial markets continued higher into October 2007, with the Dow reaching a closing high of 14,164 on Oct. 9. **December 2007: U.S. Enters Recession** The turmoil eventually caught up, and by December 2007 the United States had fallen into a [recession](https://www.investopedia.com/terms/r/recession.asp). Officially declared later, the U.S. economy was on the precipice as consumer spending fell, debts were being defaulted on, and unemployment was rising. **March 2008: Bear Stearns Acquired by JPMorgan Chase** In a government-brokered deal, [Bear Stearns is sold](https://www.investopedia.com/terms/b/bear-stearns.asp) to JPMorgan & Chase & Co. ([JPM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JPM)) for a fraction of its former value. The U.S. Federal Reserve15 stepped in with emergency funding to ensure the deal closed, aiming to prevent wider panic. **July 2008: IndyMac Bank Fails** By early July 2008, the Dow Jones Industrial Average would trade below 11,000 for the first time in over two years.16 That would not be the end of the decline. IndyMac, a major mortgage lender, collapses under the weight of loan defaults. Its failure becomes one of the largest bank failures in U.S. history, prompting intervention by the Federal Deposit Insurance Corporation (FDIC).15 It won't be the last lender to collapse. ### Fast Fact Many borrowers who obtained adjustable-rate subprime mortgages with low initial rates received no information from lenders about the details of such loans and found themselves trapped with unaffordable loan obligations when rates rose.17 **Sept. 6, 2008: Federal Takeover of Fannie Mae and Freddie Mac** With the financial markets down almost 20% from their October 2007 peaks, the government announces its [takeover of Fannie Mae and Freddie Mac](https://www.investopedia.com/articles/economics/08/fannie-mae-freddie-mac-credit-crisis.asp). This was a necessary step because of losses from heavy exposure to the collapsing subprime mortgage market.18 ![Two people hug outside of Lehman Brothers headquarters in New York on Sept. 15, 2008.](https://www.investopedia.com/thmb/N6MHzDnHyQkhhLmYOKb5Ddhd6M4=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-82823612-bede1aebbd234789925989e261bc3bf6.jpg) ![Two people hug outside of Lehman Brothers headquarters in New York on Sept. 15, 2008.](https://www.investopedia.com/thmb/N6MHzDnHyQkhhLmYOKb5Ddhd6M4=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-82823612-bede1aebbd234789925989e261bc3bf6.jpg) Newly former employees of the bankrupt Lehman Brothers hug outside its offices in Manhattan, New York, Sept. 15, 2018. Nicholas Roberts / Getty Images **Sept. 15, 2008: Lehman Brothers Declares Bankruptcy** One week later, major investment banking firm [Lehman Brothers](https://www.investopedia.com/terms/l/lehman-brothers.asp) succumbed to its overexposure to the subprime mortgage market. It announced the largest bankruptcy filing in U.S. history at that time.1920 The next day, markets plummeted, and the Dow closed down 499 points at 10,917. **Sept. 16, 2008: The "[Buck Breaks](https://www.investopedia.com/terms/b/breaking-the-buck.asp)**,**" AIG Receives Bailout, Panic Spreads, the Fed Lowers Fed Funds Rate** Things now begin moving very quickly. The collapse of Lehman caused the net asset value ([NAV](https://www.investopedia.com/terms/n/nav.asp)) of the Reserve Primary Fund to fall below \$1 per share on Sept. 16, 2008. Investors were told that for every \$1 invested, they were entitled to 97 cents. Given the staggering losses all around, this might appear insignificant—far from it. The Reserve Primary Fund was a prominent money market fund, one of the oldest in the U.S. and long considered a stable, low-risk investment vehicle. Money market funds like the Reserve Primary Fund are typically seen as safe places to park cash, as they invest in high-quality, short-term debt such as commercial paper. They aim to maintain a stable NAV of \$1 per share, giving investors predictable returns with minimal risk. However, the Reserve Primary Fund had invested in commercial paper issued by Lehman Brothers, a financial giant with significant exposure to subprime mortgage assets. When Lehman Brothers declared bankruptcy, the value of its commercial paper held by the Reserve Primary Fund suddenly dropped to near zero. This was the first time since the 1994 failure of a small money market fund that a major fund had “broken the buck.” Breaking the buck sent shock waves through the financial system. Money market funds were widely used by individuals, institutions, and corporations as a safe place for short-term cash. The loss of stability in such a trusted asset class caused immediate panic, leading investors to redeem their holdings en masse across the industry, fearing similar losses in other funds. Panic breaks out in the [money market](https://www.investopedia.com/terms/m/moneymarket.asp) fund industry, resulting in massive redemption requests. The same day, Bank of America ([BAC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BAC)) announced it was buying Merrill Lynch, the nation's largest brokerage company.20 In addition, the credit rating for AIG is downgraded because of the credit derivative contracts they'd underwritten. AIG, facing insolvency because of losses on credit default swaps, receives an \$85 billion government bailout to prevent further destabilization of the financial system.21 Finally, on this busy day, the U.S. Federal Reserve announces it would maintain its federal funds rate at 2.0%.22 **Sept. 17, 2008: SEC Bans Short Selling on Financial Sector Firms** The SEC initiates a temporary ban on [short selling](https://www.investopedia.com/terms/s/shortsale.asp) financial company stocks to help stabilize the markets.23 The markets surged on the news, and investors sent the Dow up 456 points to an intraday high of 11,483, closing up 361 at 11,388. **Sept. 18, 2008: Bailout Talks Begin** Treasury Secretary Henry Paulson proposes the Troubled Asset Relief Program ([TARP](https://www.investopedia.com/terms/t/troubled-asset-relief-program-tarp.asp)) to buy up to \$700 billion in toxic assets from banks to stabilize the financial sector. The news sends the Dow up 410 points.2425 For investors, those highs will be like the last gasp of air when a roller coaster climbs to its greatest height and is about to drop.21 ![A protestor stands outside Bear Stearns headquarters March 26, 2008 in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. ]() ![A protestor stands outside Bear Stearns headquarters March 26, 2008 in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. ](https://www.investopedia.com/thmb/SThPKf0JHA1TPNN9fSlzMDeCEMc=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-80389147-5478cfd313c241f08eae88f3444a7e82.jpg) A protestor stands outside Bear Stearns headquarters March 26, 2008, in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. Chris Hondros / Getty Images **Sept. 19, 2008: The U.S. Treasury Announces a Temporary Guarantee for Money Market Funds** In response to Reserve Primary Fund breaking the buck, the U.S. government quickly took steps to stabilize money markets, aiming to restore investor confidence and prevent further runs on these funds. **Sept. 21, 2008: GS and MS Shift to Holding Companies** Goldman Sachs Inc. ([GS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GS)) and Morgan Stanley ([MS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MS)), the last two of the major [investment banks](https://www.investopedia.com/terms/i/investmentbank.asp) still standing, converted from investment banks to bank [holding companies](https://www.investopedia.com/terms/h/holdingcompany.asp) to be able to obtain bailout funding.26 **Sept. 25, 2008: Washington Mutual Fails** After a 10-day [bank run](https://www.investopedia.com/terms/b/bankrun.asp), the [FDIC](https://www.investopedia.com/terms/f/fdic.asp) seizes Washington Mutual, then the nation's largest savings and loan and one heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase.27 **Sept. 29, 2008: Massive Market Decline** The Dow declined 774 points (6.98%), at the time the largest one-day point drop in history.28 **Oct. 3, 2008: TARP Passes** A reworked \$700 billion TARP plan, renamed the [Emergency Economic Stabilization Act of 2008](https://www.investopedia.com/terms/e/emergency-economic-stability-act.asp), passed with a bipartisan vote in Congress.29 **Oct. 6-10**: **Market Collapse Continues** The Dow continues to tumble, closing below 10,000 for the first time in years. By Oct. 10, it would bottom at 7,882, reflecting severe investor uncertainty and panic. ![U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders including Brazil's President Luiz Inacio Lula da Silva (2nd-L), Japanese Prime Minister Taro Aso (5th-L) and Italian Prime Minister Silvio Berlusconi (2nd-R) gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders are gathered at the summit to address problems currently impacting the global economies. ]() ![U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders including Brazil's President Luiz Inacio Lula da Silva (2nd-L), Japanese Prime Minister Taro Aso (5th-L) and Italian Prime Minister Silvio Berlusconi (2nd-R) gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders are gathered at the summit to address problems currently impacting the global economies. ](https://www.investopedia.com/thmb/b2fdvPTmgdtKx81oigfgGSikT00=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-83703386-c72c1369fd88463eabd33c90641f1d85.jpg) U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders were hastily gathered at the summit to address the 2008 financial crisis. Matthew Cavanaugh / Getty Images **Late 2008 – Early 2009: Federal Reserve Lowers Interest Rates to Near Zero** To stimulate the economy, the Federal Reserve reduces interest rates, aiming to improve borrowing conditions for businesses and individuals. ### 0\.16% The U.S. Federal Reserve's key interest rate was 5.26% in mid-2007. By the end of 2008, it was 0.16%.30 **March 2009: Market Bottoms Out** The S\&P 500 reaches its lowest point at 676.53. This signals the lowest point of the crisis, with gradual recovery beginning thereafter because of government intervention and market adjustments. **2009-2010: Dodd-Frank Wall Street Reform and Consumer Protection Act** A series of post-crisis regulatory reforms begins. The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced to overhaul financial regulation, aimed to reduce risks in the financial system, increase transparency, and protect consumers from unfair lending practices. ## Long-Term Impacts of the 2008 Crisis The 2008 financial crisis didn't just disappear when the stock market finally hit bottom. Its effects rippled through the American economy for years, fundamentally changing how banks operate, how homes are bought and sold, and how the government regulates Wall Street. The human toll was staggering. According to data from the U.S. Federal Reserve, by 2010, over 8.7 million American jobs had vanished. Nearly 10 million families lost their homes to foreclosure. The average U.S. household lost about \$30,000 in home value and \$70,000 in stock wealth. The unemployment rate peaked at 10% in October 2009, and many workers who lost jobs during this period never fully recovered their earning potential.313233 The government's response reshaped the financial industry. Dodd-Frank introduced the most sweeping changes to financial regulation since the Great Depression. The law created the Consumer Financial Protection Bureau to guard against predatory lending practices, required banks to maintain larger cash reserves, and implemented the "[Volcker Rule](https://www.investopedia.com/terms/v/volcker-rule.asp)," limiting banks' ability to make risky investments with customer deposits. Banks now face stricter oversight and must undergo regular "stress tests" to prove they could survive economic shocks. Mortgage lenders must verify borrowers' ability to repay loans. However, new financial innovations and the continued growth of "[shadow banking](https://www.investopedia.com/terms/s/shadow-banking-system.asp)"—financial services provided by nonbank institutions—suggest that while the next crisis might not look exactly like 2008, the potential for financial instability remains. ## What Caused the Financial Crisis of 2008? The growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of "toxic" assets, the collapse of home prices, and more contributed to the financial crisis of 2008. ## How Much Did Housing Prices Drop in 2008? From July 2006 to January 2009, the national median house price dropped by 29%.34 ## How Long Did the 2008 Housing Market Crisis Last? Different geographic areas recovered at different speeds. However, in general, the recovery began in 2011, more than three years after the housing crisis began. Home prices had fully recovered by 2012.35 ## The Bottom Line The 2008 financial crisis serves as a stark reminder that financial innovation without proper oversight can have devastating consequences. What began with a housing bubble and risky mortgage lending practices escalated into a global financial meltdown through complex financial products and inadequate regulation. While new safeguards and regulations make an exact repeat of 2008 less likely, the crisis offers enduring lessons about the dangers of excessive risk-taking, the importance of transparency in financial markets, and the interconnected nature of global finance. Perhaps most importantly, it demonstrates how problems in seemingly isolated market segments can quickly spread to threaten the entire financial system, affecting everyone from Wall Street bankers to Main Street homeowners. Get personalized, AI-powered answers built on 27+ years of trusted expertise. - [What defines a stock market crash and its economic impact?](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp) - [What initial conditions fueled the housing price bubble before the financial crisis?](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp) - [What are different types of financial crises beyond stock market crashes?](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp) ASK Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. U.S. Federal Reserve. "[Community Reinvestment Act (CRA)](https://www.federalreserve.gov/consumerscommunities/cra_about.htm)." 2. Congressional Research Service. "[Bank Leverage Limits and Risk-Taking in the Mortgage Business](https://www.fdic.gov/analysis/cfr/bank-research-conference/annual-21st/papers/marodin-paper.pdf)." 3. Congressional Research Service. "[Government Assistance for AIG: Summary and Cost](https://sgp.fas.org/crs/misc/R42953.pdf)." Summary Page. 4. Baily, Martin Neil, Robert E. Litan, and Matthew S. Johnson. "[The Origins of the Financial Crisis](https://www.brookings.edu/wp-content/uploads/2016/06/11_origins_crisis_baily_litan.pdf)." *The Brookings Institution, Fixing Finance Series*, vol. 3, November 2008, pp. 7-32. 5. The Washington Post. "[U.S. Consumer Debt Grows at Alarming Rate](https://www.washingtonpost.com/archive/business/technology/2004/01/12/us-consumer-debt-grows-at-alarming-rate/a445655b-8507-4082-802a-5b3b1e90272d/)." 6. *Washington Post*. "[What Caused the Financial Crisis? The Big Lie Goes Viral](https://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html)." 7. Federal Deposit Insurance Corporation. "[Origins of the Crisis](https://www.fdic.gov/bank/historical/crisis/chap1.pdf)." 8. Congressional Research Service. "[Bank Capital Requirements: A Primer and Policy Issues](https://crsreports.congress.gov/product/pdf/R/R47447)." 9. American Enterprise Institute. "[How Fannie, Freddie and Politicians Caused the Crisis](https://www.aei.org/articles/how-fannie-freddie-and-politicians-caused-the-crisis/)." 10. Competitive Enterprise Institute. "[The Financial Crisis 10 Years Later](https://cei.org/blog/the-financial-crisis-10-years-later-fannie-and-freddie-fueled-the-subprime-mortgage-bubble/)." 11. *New York Times*. "[Decade After Crisis, No Resolution for Fannie and Freddie](https://www.nytimes.com/2017/02/07/business/dealbook/decade-after-crisis-no-resolution-for-fannie-and-freddie.html)." 12. U.S. Federal Reserve of St. Louis. "[New Century Financial Corporation 8-K](https://fraser.stlouisfed.org/archival-collection/securities-exchange-commission-5147/new-century-financial-corporation-519318)." 13. The Wall Street Journal. "[J.P. Morgan Buys Bear in Fire Sale, As Fed Widens Credit to Avert Crisis](https://www.wsj.com/articles/SB120569598608739825)." 14. Baily, Martin Neil, Robert E. Litan, and Matthew S. Johnson. "[The Origins of the Financial Crisis](https://www.brookings.edu/wp-content/uploads/2016/06/11_origins_crisis_baily_litan.pdf)." *The Brookings Institution, Fixing Finance Series*, vol. 3, November 2008, pp. 32, 38-39. 15. *New York Times*. "[Regulators Seize Mortgage Lender](https://www.nytimes.com/2008/07/12/business/12indymac.html)." 16. Yahoo Finance. "[Dow Jones Industrial Average (^DJI): Historical Data](https://finance.yahoo.com/quote/%5EDJI/history?period1=1215907200&period2=1216166400&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true)." Date Range: July 13, 2008 to July 16, 2008. 17. Center for American Progress. "[The 2008 Housing Crisis](https://www.americanprogress.org/article/2008-housing-crisis/)." 18. Federal Housing Finance Agency. "[History of Fannie Mae and Freddie Mac Conservatorships](https://www.fhfa.gov/Conservatorship/Pages/History-of-Fannie-Mae--Freddie-Conservatorships.aspx)." 19. U.S. Securities and Exchange Commission. "[Statement on Proposed Lehman Brothers, Inc. Acquisition by Barclays](https://www.sec.gov/news/press/2008/2008-206.htm)." 20. *New York Times*. "[Lehman Files for Bankruptcy; Merrill Is Sold](https://www.nytimes.com/2008/09/15/business/15lehman.html)." 21. *New York Times*. "[Fed Rescues AIG with \$85 Billion Loan for 80% Stake](https://www.nytimes.com/2008/09/17/business/worldbusiness/17iht-17insure.16217125.html)." 22. U.S. Federal Reserve. "[Statement](https://fraser.stlouisfed.org/title/677/item/22532/content/pdf/20080916statement)." 23. U.S. Securities and Exchange Commission. "[SEC Issues New Rules to Protect Investors Against Naked Short Selling Abuses](https://www.sec.gov/news/press/2008/2008-204.htm)." 24. U.S. Department of Treasury. "[Testimony by Treasury Secretary Henry M. Paulson, Jr](https://home.treasury.gov/news/press-releases/hp1279)." 25. U.S. Department of Treasury. "[About TARP](https://home.treasury.gov/data/troubled-assets-relief-program/about-tarp)." 26. The New York Times. "[As Goldman and Morgan Shift, a Wall St. Era Ends](https://archive.nytimes.com/dealbook.nytimes.com/2008/09/21/goldman-morgan-to-become-bank-holding-companies/)." 27. U.S. Securities and Exchange Commission. "[JP Morgan Chase Acquires the Deposits, Assets, and Certain Liabilities of Washington Mutual's Banking Operations](https://www.sec.gov/Archives/edgar/data/19617/000119312508201638/dex991.htm)." 28. Yahoo Finance. "[Dow Jones Industrial Average (^DJI): Historical Data](https://finance.yahoo.com/quote/%5EDJI/history?period1=1221523200&period2=1221782400&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true)." Date Range: Sept. 16, 2008 to Sept. 19, 2008. 29. Congressional Research Service. "[Troubled Asset Relief Program (TARP): Implementation and Status](https://crsreports.congress.gov/product/pdf/R/R41427)." Summary Page. 30. U.S. Federal Reserve of St. Louis. "[Monthly Federal Funds Effective Rate, U.S](https://fred.stlouisfed.org/)." 31. U.S. Federal Reserve of St. Louis. "[Median Sales Price of Houses Sold for the United States](https://fred.stlouisfed.org/series/MSPUS)." 32. U.S. Federal Reserve of St. Louis. "[Unemployment Rate](https://fred.stlouisfed.org/series/UNRATE)." 33. U.S. Federal Reserve of St. Louis. "[Delinquencies and Delinquency Rates](https://fred.stlouisfed.org/categories/32440)." 34. Demographia. "[The Housing Downturn in the United States 2009 First Quarter Update](http://demographia.com/db-ushsg2009q1.pdf)." Page 1. 35. Medium. "[Recession Strategy: What Can 2008’s Data Teach Us About When to Buy and When to Sell?](https://medium.com/atlasa/recession-strategy-what-can-2008s-data-teach-us-about-when-to-buy-and-when-to-sell-3515b838e598#:~:text=It%20took%203.5%20years%20for,by%2019%25%20after%20the%20recession.)" Compare Accounts Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Read more - [Investing](https://www.investopedia.com/investing-4427685) - [Markets](https://www.investopedia.com/markets-4689752) - [International Markets](https://www.investopedia.com/international-markets-4689750) Partner Links ## Related Articles [![Bombay Stock Exchange: The first and largest securities market in India.]() ![Bombay Stock Exchange: The first and largest securities market in India.](https://www.investopedia.com/thmb/EStJ3XIwii82SMlMirWRNfILHtA=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/Bombaystockexchange_final-61a1e6f7ec98464e8c8053f805d155c5.png) The Bombay Stock Exchange (BSE): Asia's First Securities Market](https://www.investopedia.com/terms/b/bombaystockexchange.asp) [![Nighttime view of blue stock data screen next to sidewalk in urban center.]() ![Nighttime view of blue stock data screen next to sidewalk in urban center.](https://www.investopedia.com/thmb/Y8MaxUEy_np3Fi4iiRenvNFpQDY=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/investing16-5bfc2b8fc9e77c00519aa657.jpg) Foreign Currency Effects: Definition, Investment Impact, Example](https://www.investopedia.com/terms/f/foreigncurrencyeffects.asp) [![Group of professional black people]() ![Group of professional black people](https://www.investopedia.com/thmb/R7r1ATeuy2udO4VxA94eALYNfp4=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-1081702848-021f38f7f0034905a972bb01eddf042f.jpg) RCEP Explained: Fostering Global Trade Relations](https://www.investopedia.com/terms/r/regional-comprehensive-economic-partnership-rcep.asp) [![]() ![](https://www.investopedia.com/thmb/9N7awXlUSMF0GaLB4ekoKUkrf84=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/investing9-5bfc2b8d46e0fb0051bddfee.jpg) Noise: What it Means, Cause, Alternatives](https://www.investopedia.com/terms/n/noise.asp) [![A bear and bull statue outside the Frankfurt Stock Exchange]() ![A bear and bull statue outside the Frankfurt Stock Exchange](https://www.investopedia.com/thmb/TjcOPaC1Wa42NoGo731w49qmlN4=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-515555194-6e815f6a6d6e49b492acfd3d5e5c28aa.jpg) Bull vs. Bear Markets: What's the Difference?](https://www.investopedia.com/insights/digging-deeper-bull-and-bear-markets/) [![A closeup of a hand holding a pen and pointing to a line on a screen displaying stock data that shows a recovery in price.]() ![A closeup of a hand holding a pen and pointing to a line on a screen displaying stock data that shows a recovery in price.](https://www.investopedia.com/thmb/EhuHlH3GtGurbH1v9y1MZ4-wlzw=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/U-ShapedRecovery-f265f904cae845799fe7c6c5e27cc13e.jpg) U-Shaped Recovery: What It Means, How It Works, and Examples](https://www.investopedia.com/terms/u/u-shaped-recovery.asp) [![Business Couple Discussing Business Profit on a Modern Interface]() ![Business Couple Discussing Business Profit on a Modern Interface](https://www.investopedia.com/thmb/Dr6VrPde7GwoNL5vvSS2ScvGzbc=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-985884916-625a2b5fb8dc44eca0b8492d516c1d02.jpg) Tech Bubble Insights: Definition, Dynamics, and Notable Instances](https://www.investopedia.com/terms/t/tech_bubble.asp) [![]() ![](https://www.investopedia.com/thmb/Wr3066-JYFe1ojmSpc-7ukZk_kg=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/shutterstock_112522391-5bfc2b9846e0fb0051bde2d3.jpg) 6 Ways to Invest in Foreign Stocks and Diversify Your Portfolio](https://www.investopedia.com/articles/investing/032615/how-trade-foreign-stocks.asp) [![Kuala Lumpur cityscape with Petronas Towers at sunset, Malaysia]() ![Kuala Lumpur cityscape with Petronas Towers at sunset, Malaysia](https://www.investopedia.com/thmb/4OI3k_sbWZ4fGllX6hAGK_-1SoQ=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/kuala-lumpur-cityscape-with-petronas-towers-at-sunset--malaysia-1148024549-da982d349f7c492ba978120781a6db16.jpg) What Defines a Tiger Economy? Insights and Global Examples](https://www.investopedia.com/terms/t/tigereconomy.asp) [![Aerial View of Buildings in City]() ![Aerial View of Buildings in City](https://www.investopedia.com/thmb/qcHrVhAGOpqGZawa-SQ3JYlNdgI=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/aerial-view-of-buildings-in-city-965094550-3759b2a498cb478bbb124dbb70f81824-5501cbe99c094cecb11fdd058d01fb73.jpg) Role and Function of India's SEBI in Securities Regulation](https://www.investopedia.com/terms/s/sebi.asp) [![City of London financial district with Royal Exchange building, London, England, UK]() ![City of London financial district with Royal Exchange building, London, England, UK](https://www.investopedia.com/thmb/1Ae4tkjGqyhVPWAR_tEe8DgdPH4=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/city-of-london-financial-district-with-royal-exchange-building--london--england--uk-913866368-bd4527f4d5f04f478c2d1f2c2c7f3def.jpg) What is a Jobber? Understanding Their Role in Stockjobbing](https://www.investopedia.com/terms/j/jobber.asp) [![]() ![](https://www.investopedia.com/thmb/0gEvqa3USxLYNuKR27A7wq4UFZE=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/investing20-5bfc2b8f46e0fb00517be081.jpg) What Is a Blue Chip Swap? Definition and Impact](https://www.investopedia.com/terms/b/bluechipswap.asp) [![]() ![](https://www.investopedia.com/thmb/okowPHHd13gf3lIirO09CV7gUDo=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/investing5-5bfc2b8e46e0fb0026016f0e.jpg) Guide to International Depository Receipts: Uses and Definition](https://www.investopedia.com/terms/i/idr.asp) [![Midsection Businessmen Analyzing Charts on Laptop in Office]() ![Midsection Businessmen Analyzing Charts on Laptop in Office](https://www.investopedia.com/thmb/rFuYgvtGOzSCAfsqr0MuPFc2VVk=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-1128046391-3672d109e5734da0831dcd6791ce0230.jpg) What Is the Dow Jones Sustainability World Index? Key Facts and Methodology](https://www.investopedia.com/terms/d/djones-sustainability-world.asp) [![A busy street in Havana, Cuba]() ![A busy street in Havana, Cuba](https://www.investopedia.com/thmb/xf8tYXA3hPwXECwhKHA7YOK2nXc=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/TAL-havana-cuba-WTG2023-fd6af45f63c2460b99d10eb58f98df6e.jpg) How Ending the U.S. Embargo Could Transform Cuba's Economy](https://www.investopedia.com/articles/investing/022415/impact-ending-us-embargo-cuba.asp) [![Hong Kong Victoria harbor at sunset]() ![Hong Kong Victoria harbor at sunset](https://www.investopedia.com/thmb/lS48_z3Da8o3OSrGADoj17i5mkA=/282x188/filters:no_upscale:max_bytes$150000$:strip_icc/GettyImages-1141122437-fd9fd062e8604e9899f0875b6f628a4b.jpg) Special Administrative Regions in China: Hong Kong and Macau Explained](https://www.investopedia.com/terms/s/special-administrative-region.asp) [Investopedia](https://www.investopedia.com/) [Newsletter Sign Up](https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp) Follow Us - [News](https://www.investopedia.com/news-4427706) - [Investing](https://www.investopedia.com/investing-4427685) - [Simulator](https://www.investopedia.com/simulator/?inv_to_sim=global_nav) - [Banking](https://www.investopedia.com/banking-4427754) - [Personal Finance](https://www.investopedia.com/personal-finance-4427760) - [Economy](https://www.investopedia.com/economy-4689801) - [Reviews](https://www.investopedia.com/financial-product-reviews-7110783) - [Dictionary](https://www.investopedia.com/financial-term-dictionary-4769738) - [About Us](https://www.investopedia.com/about-us-5093223) - [Editorial Process](https://www.investopedia.com/legal-4768893#toc-editorial-policy) - [Careers](https://www.people.inc/careers) - [Contact Us](https://support.investopedia.com/contactus) - [Privacy Policy](https://www.people.inc/brands-privacy) - [Terms of Service](https://www.people.inc/brands-termsofservice) - [Advertise](https://www.people.inc/advertising) - [\#](https://www.investopedia.com/terms-beginning-with-num-4769350) - [A](https://www.investopedia.com/terms-beginning-with-a-4769351) - [B](https://www.investopedia.com/terms-beginning-with-b-4769352) - [C](https://www.investopedia.com/terms-beginning-with-c-4769353) - [D](https://www.investopedia.com/terms-beginning-with-d-4769354) - [E](https://www.investopedia.com/terms-beginning-with-e-4769355) - [F](https://www.investopedia.com/terms-beginning-with-f-4769356) - [G](https://www.investopedia.com/terms-beginning-with-g-4769357) - [H](https://www.investopedia.com/terms-beginning-with-h-4769358) - [I](https://www.investopedia.com/terms-beginning-with-i-4769359) - [J](https://www.investopedia.com/terms-beginning-with-j-4769360) - [K](https://www.investopedia.com/terms-beginning-with-k-4769361) - [L](https://www.investopedia.com/terms-beginning-with-l-4769362) - [M](https://www.investopedia.com/terms-beginning-with-m-4769363) - [N](https://www.investopedia.com/terms-beginning-with-n-4769364) - [O](https://www.investopedia.com/terms-beginning-with-o-4769365) - [P](https://www.investopedia.com/terms-beginning-with-p-4769366) - [Q](https://www.investopedia.com/terms-beginning-with-q-4769367) - [R](https://www.investopedia.com/terms-beginning-with-r-4769368) - [S](https://www.investopedia.com/terms-beginning-with-s-4769369) - [T](https://www.investopedia.com/terms-beginning-with-t-4769370) - [U](https://www.investopedia.com/terms-beginning-with-u-4769371) - [V](https://www.investopedia.com/terms-beginning-with-v-4769372) - [W](https://www.investopedia.com/terms-beginning-with-w-4769373) - [X](https://www.investopedia.com/terms-beginning-with-x-4769374) - [Y](https://www.investopedia.com/terms-beginning-with-y-4769375) - [Z](https://www.investopedia.com/terms-beginning-with-z-4769376) Investopedia is part of the [People Inc.](https://www.people.inc/) publishing family. Newsletter Sign Up Newsletter Sign Up ![]()

Readable Markdown

### Key Takeaways - The 2008 financial crisis was driven by risky mortgage lending, complex financial instruments like MBS, and inadequate regulation. - Credit default swaps (CDS) exacerbated the crisis, as these unregulated financial products failed in the collapsing housing market. - The crisis resulted in the Dodd-Frank Act, aimed at increasing regulation and preventing future financial collapses. - U.S. economic devastation included a \$16 trillion loss in household net worth and unprecedented reforms. - Despite safeguards, markets face risks from new financial products like derivatives and shadow banking systems. Get personalized, AI-powered answers built on 27+ years of trusted expertise. The 2008 financial crisis was primarily triggered by the collapse of the housing bubble, leading to the worst economic downturn since the Great Depression. The crisis began years earlier as risky financial practices grew unchecked, creating a housing bubble that eventually burst, causing billions in global economic losses. Key factors included subprime mortgage lending, risky financial products, and regulatory failures. Many Americans recall watching in horror as the Dow Jones Industrial Average plummeted nearly 780 points in a single day in October of that year, then its biggest one-day drop in history. The seeds of the crisis would cost the global economy more than \$2 trillion of economic growth. ## Key Factors Leading to the 2008 Stock Market Collapse The story of the 2008 stock market crash is more than just numbers on a screen or complex financial instruments. It's about homeowners who lost everything when their [adjustable-rate mortgages](https://www.investopedia.com/terms/a/arm.asp) suddenly jumped beyond what they could afford, retirees who had their life savings cut in half, and workers who lost jobs as businesses shuttered in the subsequent [Great Recession](https://www.investopedia.com/terms/g/great-recession.asp). Understanding how this crisis unfolded isn't just about learning history—it's about recognizing warning signs that could prevent future financial disasters. Here’s a breakdown of the main factors behind the crash. ### 1\. The Housing Bubble and the Role of Subprime Mortgages The crisis began with a housing bubble, fueled by years of ultra-low interest rates and an increased availability of mortgages. Financial institutions offered “subprime” mortgages to people with low creditworthiness, often with little or no income verification. These high-risk loans, initially affordable because of low introductory rates, became unmanageable when interest rates adjusted upward, causing many borrowers to default. Throughout the 1990s and early 2000s, the government encouraged homeownership and supported policies that enabled lenders to offer mortgages to more people, including those with low credit scores. Policies like the [Community Reinvestment Act](https://www.investopedia.com/terms/c/community_reinvestment_act.asp) (1977) were often blamed for the crisis, but it’s more accurate to say that the private sector took these policies and ran with them by loosening credit standards and pursuing aggressive lending practices to profit from and prop up the housing boom.12 ### 2\. Securitization: The Impact of Mortgage-Backed Securities Financial institutions pooled these risky subprime loans into [mortgage-backed securities (MBS)](https://www.investopedia.com/terms/m/mbs.asp) and sold them to investors worldwide. MBSs were complex financial products that appeared to offer high returns with low risk, because of the presumed diversification of underlying assets. However, as housing prices fell and defaults increased, the value of these securities plummeted, creating a ripple effect across the financial system. ### 3\. Credit Default Swaps: Risks and Derivatives To further “protect” against potential losses on MBS, banks and investors turned to credit default swaps, a form of insurance on these securities. Thus, another popular investment vehicle during this period became a credit derivative, the [credit default swap (CDS)](https://www.investopedia.com/terms/c/creditdefaultswap.asp). CDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was largely unregulated. This meant that there was no requirement that the issuers of CDS contracts maintain enough money in their reserves to pay out under a worst-case scenario (such as an economic downturn). In early 2008, this spelled potential disaster for American International Group, Inc. (AIG), one of the nation's leading financial companies, when it couldn't meet claims and announced huge losses in its portfolio of underwritten CDS contracts.34 ### 4\. The Dangers of Adjustable-Rate Mortgages Among the most potentially harmful of the mortgages offered to subprime borrowers were the [interest-only ARM](https://www.investopedia.com/terms/i/interestonlyarm.asp) and the payment option ARM. Both were adjustable-rate mortgages. These mortgages allow the borrower to make much lower initial payments than would be due under a fixed-rate mortgage. After a period of time, often only two or three years, these ARMs reset, often at higher rates. The payments then fluctuate as frequently as monthly, sometimes resulting in much larger payments than those the borrower paid initially. In the up-trending market (and growing housing bubble) that existed in the early 2000s, these mortgages were thought to be virtually risk-free. Borrowers could end up with positive equity despite their low mortgage payments because their homes had increased in value since the purchase date. If they couldn't afford the higher payments after their mortgage rates reset, they could simply sell the homes for a profit. ### 5\. Escalating Consumer Debt: A Crisis Catalyst To compound the potential mortgage risk, total [consumer debt](https://www.investopedia.com/terms/c/consumer-debt.asp), in general, continued to grow at an astonishing rate. In 2004, consumer debt hit \$2 trillion for the first time, meaning it doubled in less than 10 years.5 ### 6\. How Regulatory Oversight Changes Fueled the Crisis The years leading up to the 2008 financial crisis were marked by significant regulatory and legal changes that reduced oversight and fueled risk-taking in the financial industry. Here are some key changes from the 1980s through the early 2000s that helped set the stage for the crisis: **1982: [The Garn-St. Germain Depository Institutions Act](https://www.investopedia.com/terms/g/garn-st-germain-depository-institutions-act.asp)** This act deregulated the savings and loan industry, allowing institutions to expand into new types of lending, such as adjustable-rate mortgages. It was intended to help struggling banks but led to riskier lending practices. The act is sometimes credited with setting a precedent for financial deregulation that would continue through the 1980s and beyond. **1994: The Riegle-Neal Interstate Banking and Branching Efficiency Act** This act removed barriers for banks to operate across state lines, facilitating the growth of large, national banks. While this helped banks diversify, it also contributed to the consolidation of banking power, allowing institutions to become “[too big to fail](https://www.investopedia.com/terms/t/too-big-to-fail.asp)” and increasing systemic risk across the financial system. **1999: The Gramm-Leach-Bliley Act (GLBA)** [GLBA](https://www.investopedia.com/terms/g/glba.asp), also known as the Financial Services Modernization Act, repealed major parts of the Glass-Steagall Act of 1933, which had previously separated commercial banking from investment banking. By allowing banks to merge with securities and insurance companies, GLBA paved the way for “universal banks” that engaged in a wide range of financial services, including risky investments. This increase in complexity and interconnectedness heightened the risk of a widespread financial collapse. **2000: The Commodity Futures Modernization Act (CFMA)** The [CFMA](https://www.investopedia.com/terms/c/commodityfuturescontract.asp) removed many regulations from derivatives trading, including credit default swaps (CDS), a key factor in the 2008 financial crisis. By exempting CDS and other complex derivatives from regulation, the act allowed institutions to take on massive risks, which compounded losses when defaults on subprime loans increased. The lack of oversight meant that companies like AIG could issue large amounts of CDS with minimal capital reserves to cover potential losses. **Shift to “Light-Touch” Regulation in the 2000s** The 2000s were marked by an overall shift toward “light-touch” regulation, especially within agencies like the SEC. The focus was on allowing financial markets to self-regulate and emphasizing innovation over caution. This attitude led to minimal oversight of mortgage-backed securities and [collateralized debt obligations (CDOs)](https://www.investopedia.com/terms/c/cdo.asp) that bundled subprime loans, which ultimately proliferated risk throughout the system. **2004: SEC’s Net Capital Rule Change** In 2004, the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp) allowed major investment banks to increase their leverage ratios significantly, meaning they could borrow much more relative to their capital. Previously, banks had been limited to a leverage ratio of 12 to one, but the new rule allowed ratios as high as 30 to one or even 40 to one.6 This change enabled banks to take on enormous risks by financing long-term assets with short-term debt, increasing their vulnerability to any market downturn.78 ### 7\. Fannie Mae and Freddie Mac's Involvement In the wake of the crash, many of those who backed the deregulatory efforts of the previous years were intent on blaming two government-sponsored enterprises, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), for the crisis.91011 Here’s a look at their involvement and why they’re often mentioned in discussions about the crash: **Role in the Housing Market** Fannie Mae and Freddie Mac were created to promote homeownership by buying mortgages from lenders, packaging them into securities, and selling them to investors. This helped lenders free up capital to issue more loans, thus increasing homeownership. By the 2000s, both entities were heavily involved in purchasing mortgages, including riskier subprime loans, from the private market. **Increased Risk-Taking in the Early 2000s** Under pressure from both political and market forces to expand homeownership, Fannie and Freddie increasingly purchased subprime and [alt-A loans](https://www.investopedia.com/terms/a/alt-a.asp) (those with limited documentation or low credit quality). Although they initially held stricter underwriting standards than private lenders, Fannie and Freddie relaxed their criteria to compete with private institutions benefiting from the booming housing market. **Securitization of Risky Mortgages** Like private banks, Fannie and Freddie pooled mortgages into mortgage-backed securities and sold them to investors. While they maintained guarantees on some of these securities, they held significant exposure to the housing market. When housing prices fell, and foreclosures surged, Fannie and Freddie suffered substantial losses, needing a federal bailout in 2008 to prevent collapse. Their financial distress contributed to the crisis’s depth but did not initiate it. **Private Market Influence** Much of the riskiest lending during the housing bubble came from private lenders who issued subprime mortgages with even lower standards than those of Fannie and Freddie. These private institutions created their own MBSs, often without the oversight or implied government backing that Fannie and Freddie had. This private-market securitization, which exploded in the early 2000s, exposed the financial system to unmanageable levels of risk and was a core driver of the crisis. **Systemic Impact, Not Direct Cause** Fannie and Freddie were caught in the wave of broader housing market speculation and lending practices but didn’t drive the most extreme forms of subprime lending. Buying riskier loans contributed to inflating the housing bubble and increasing overall exposure to the housing market’s downturn, which worsened the crisis when it arrived. However, private lenders and Wall Street banks were primarily responsible for the riskiest practices and highest volumes of subprime loans. ### 8\. The Collapse of Wall Street Giants The most proximate cause (the last domino to fall, as it were) of the crisis was the collapse of storied institutions at the heart of Wall Street. As mortgage defaults rose, financial giants holding large amounts of MBS, such as Lehman Brothers, faced mounting losses and liquidity crises. Lehman’s bankruptcy in 2008 triggered widespread panic, as it demonstrated that even major institutions could collapse. This eroded investor confidence globally, froze credit markets, and led to widespread economic distress. ### \$150 billion The amount of [bailout money AIG received](https://www.investopedia.com/articles/economics/09/american-investment-group-aig-bailout.asp) from the U.S. federal government in 2008, which the company repaid with interest by 2013.3 ## Timeline of the 2008 Stock Market Crash **April 2, 2007: Major Subprime Lender Goes Under** New Century Financial Corporation, a leading subprime mortgage lender, files for bankruptcy.12 **July 31, 2007: Bear Stearns Files for Bankruptcy** [Bear Stearns goes under](https://www.investopedia.com/articles/07/bear-stearns-collapse.asp), drowned in a sea of massive losses resulting from underwriting many of the investment vehicles linked to the subprime mortgage market.1314 **Oct. 9, 2007: Stock Market Peak** It was soon obvious to all that the market was in trouble, and a subprime mortgage crisis was looming. Homeowners defaulted at high rates as the creative variations of subprime mortgages reset to higher payments as home prices declined. Many homeowners reported being "upside down"—they owed more on their mortgages than their homes were worth—and could no longer flip them to make themselves whole. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. The [subprime meltdown](https://www.investopedia.com/articles/07/subprime-overview.asp) was taking its toll on homeowners and the real estate market. Despite this apparent mess, the financial markets continued higher into October 2007, with the Dow reaching a closing high of 14,164 on Oct. 9. **December 2007: U.S. Enters Recession** The turmoil eventually caught up, and by December 2007 the United States had fallen into a [recession](https://www.investopedia.com/terms/r/recession.asp). Officially declared later, the U.S. economy was on the precipice as consumer spending fell, debts were being defaulted on, and unemployment was rising. **March 2008: Bear Stearns Acquired by JPMorgan Chase** In a government-brokered deal, [Bear Stearns is sold](https://www.investopedia.com/terms/b/bear-stearns.asp) to JPMorgan & Chase & Co. ([JPM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JPM)) for a fraction of its former value. The U.S. Federal Reserve15 stepped in with emergency funding to ensure the deal closed, aiming to prevent wider panic. **July 2008: IndyMac Bank Fails** By early July 2008, the Dow Jones Industrial Average would trade below 11,000 for the first time in over two years.16 That would not be the end of the decline. IndyMac, a major mortgage lender, collapses under the weight of loan defaults. Its failure becomes one of the largest bank failures in U.S. history, prompting intervention by the Federal Deposit Insurance Corporation (FDIC).15 It won't be the last lender to collapse. ### Fast Fact Many borrowers who obtained adjustable-rate subprime mortgages with low initial rates received no information from lenders about the details of such loans and found themselves trapped with unaffordable loan obligations when rates rose.17 **Sept. 6, 2008: Federal Takeover of Fannie Mae and Freddie Mac** With the financial markets down almost 20% from their October 2007 peaks, the government announces its [takeover of Fannie Mae and Freddie Mac](https://www.investopedia.com/articles/economics/08/fannie-mae-freddie-mac-credit-crisis.asp). This was a necessary step because of losses from heavy exposure to the collapsing subprime mortgage market.18 Newly former employees of the bankrupt Lehman Brothers hug outside its offices in Manhattan, New York, Sept. 15, 2018. Nicholas Roberts / Getty Images **Sept. 15, 2008: Lehman Brothers Declares Bankruptcy** One week later, major investment banking firm [Lehman Brothers](https://www.investopedia.com/terms/l/lehman-brothers.asp) succumbed to its overexposure to the subprime mortgage market. It announced the largest bankruptcy filing in U.S. history at that time.1920 The next day, markets plummeted, and the Dow closed down 499 points at 10,917. **Sept. 16, 2008: The "[Buck Breaks](https://www.investopedia.com/terms/b/breaking-the-buck.asp)**,**" AIG Receives Bailout, Panic Spreads, the Fed Lowers Fed Funds Rate** Things now begin moving very quickly. The collapse of Lehman caused the net asset value ([NAV](https://www.investopedia.com/terms/n/nav.asp)) of the Reserve Primary Fund to fall below \$1 per share on Sept. 16, 2008. Investors were told that for every \$1 invested, they were entitled to 97 cents. Given the staggering losses all around, this might appear insignificant—far from it. The Reserve Primary Fund was a prominent money market fund, one of the oldest in the U.S. and long considered a stable, low-risk investment vehicle. Money market funds like the Reserve Primary Fund are typically seen as safe places to park cash, as they invest in high-quality, short-term debt such as commercial paper. They aim to maintain a stable NAV of \$1 per share, giving investors predictable returns with minimal risk. However, the Reserve Primary Fund had invested in commercial paper issued by Lehman Brothers, a financial giant with significant exposure to subprime mortgage assets. When Lehman Brothers declared bankruptcy, the value of its commercial paper held by the Reserve Primary Fund suddenly dropped to near zero. This was the first time since the 1994 failure of a small money market fund that a major fund had “broken the buck.” Breaking the buck sent shock waves through the financial system. Money market funds were widely used by individuals, institutions, and corporations as a safe place for short-term cash. The loss of stability in such a trusted asset class caused immediate panic, leading investors to redeem their holdings en masse across the industry, fearing similar losses in other funds. Panic breaks out in the [money market](https://www.investopedia.com/terms/m/moneymarket.asp) fund industry, resulting in massive redemption requests. The same day, Bank of America ([BAC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BAC)) announced it was buying Merrill Lynch, the nation's largest brokerage company.20 In addition, the credit rating for AIG is downgraded because of the credit derivative contracts they'd underwritten. AIG, facing insolvency because of losses on credit default swaps, receives an \$85 billion government bailout to prevent further destabilization of the financial system.21 Finally, on this busy day, the U.S. Federal Reserve announces it would maintain its federal funds rate at 2.0%.22 **Sept. 17, 2008: SEC Bans Short Selling on Financial Sector Firms** The SEC initiates a temporary ban on [short selling](https://www.investopedia.com/terms/s/shortsale.asp) financial company stocks to help stabilize the markets.23 The markets surged on the news, and investors sent the Dow up 456 points to an intraday high of 11,483, closing up 361 at 11,388. **Sept. 18, 2008: Bailout Talks Begin** Treasury Secretary Henry Paulson proposes the Troubled Asset Relief Program ([TARP](https://www.investopedia.com/terms/t/troubled-asset-relief-program-tarp.asp)) to buy up to \$700 billion in toxic assets from banks to stabilize the financial sector. The news sends the Dow up 410 points.2425 For investors, those highs will be like the last gasp of air when a roller coaster climbs to its greatest height and is about to drop.21 A protestor stands outside Bear Stearns headquarters March 26, 2008, in New York. Hundreds of housing activists stormed the lobby of the Bear Stearns skyscraper in Manhattan, overwhelming security and staging a noisy rally, protesting the government-backed sale and bailout of the investment bank. Chris Hondros / Getty Images **Sept. 19, 2008: The U.S. Treasury Announces a Temporary Guarantee for Money Market Funds** In response to Reserve Primary Fund breaking the buck, the U.S. government quickly took steps to stabilize money markets, aiming to restore investor confidence and prevent further runs on these funds. **Sept. 21, 2008: GS and MS Shift to Holding Companies** Goldman Sachs Inc. ([GS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GS)) and Morgan Stanley ([MS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MS)), the last two of the major [investment banks](https://www.investopedia.com/terms/i/investmentbank.asp) still standing, converted from investment banks to bank [holding companies](https://www.investopedia.com/terms/h/holdingcompany.asp) to be able to obtain bailout funding.26 **Sept. 25, 2008: Washington Mutual Fails** After a 10-day [bank run](https://www.investopedia.com/terms/b/bankrun.asp), the [FDIC](https://www.investopedia.com/terms/f/fdic.asp) seizes Washington Mutual, then the nation's largest savings and loan and one heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase.27 **Sept. 29, 2008: Massive Market Decline** The Dow declined 774 points (6.98%), at the time the largest one-day point drop in history.28 **Oct. 3, 2008: TARP Passes** A reworked \$700 billion TARP plan, renamed the [Emergency Economic Stabilization Act of 2008](https://www.investopedia.com/terms/e/emergency-economic-stability-act.asp), passed with a bipartisan vote in Congress.29 **Oct. 6-10**: **Market Collapse Continues** The Dow continues to tumble, closing below 10,000 for the first time in years. By Oct. 10, it would bottom at 7,882, reflecting severe investor uncertainty and panic. U.S. President George W. Bush (4th-L) and Secretary of the Treasury Henry Paulson (3rd-L) look on while world leaders gather at the Summit on Financial Markets and the World Economy at the National Building Museum on November 15, 2008 in Washington, DC. Twenty world leaders were hastily gathered at the summit to address the 2008 financial crisis. Matthew Cavanaugh / Getty Images **Late 2008 – Early 2009: Federal Reserve Lowers Interest Rates to Near Zero** To stimulate the economy, the Federal Reserve reduces interest rates, aiming to improve borrowing conditions for businesses and individuals. ### 0\.16% The U.S. Federal Reserve's key interest rate was 5.26% in mid-2007. By the end of 2008, it was 0.16%.30 **March 2009: Market Bottoms Out** The S\&P 500 reaches its lowest point at 676.53. This signals the lowest point of the crisis, with gradual recovery beginning thereafter because of government intervention and market adjustments. **2009-2010: Dodd-Frank Wall Street Reform and Consumer Protection Act** A series of post-crisis regulatory reforms begins. The Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced to overhaul financial regulation, aimed to reduce risks in the financial system, increase transparency, and protect consumers from unfair lending practices. ## Long-Term Impacts of the 2008 Crisis The 2008 financial crisis didn't just disappear when the stock market finally hit bottom. Its effects rippled through the American economy for years, fundamentally changing how banks operate, how homes are bought and sold, and how the government regulates Wall Street. The human toll was staggering. According to data from the U.S. Federal Reserve, by 2010, over 8.7 million American jobs had vanished. Nearly 10 million families lost their homes to foreclosure. The average U.S. household lost about \$30,000 in home value and \$70,000 in stock wealth. The unemployment rate peaked at 10% in October 2009, and many workers who lost jobs during this period never fully recovered their earning potential.313233 The government's response reshaped the financial industry. Dodd-Frank introduced the most sweeping changes to financial regulation since the Great Depression. The law created the Consumer Financial Protection Bureau to guard against predatory lending practices, required banks to maintain larger cash reserves, and implemented the "[Volcker Rule](https://www.investopedia.com/terms/v/volcker-rule.asp)," limiting banks' ability to make risky investments with customer deposits. Banks now face stricter oversight and must undergo regular "stress tests" to prove they could survive economic shocks. Mortgage lenders must verify borrowers' ability to repay loans. However, new financial innovations and the continued growth of "[shadow banking](https://www.investopedia.com/terms/s/shadow-banking-system.asp)"—financial services provided by nonbank institutions—suggest that while the next crisis might not look exactly like 2008, the potential for financial instability remains. ## What Caused the Financial Crisis of 2008? The growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of "toxic" assets, the collapse of home prices, and more contributed to the financial crisis of 2008. ## How Much Did Housing Prices Drop in 2008? From July 2006 to January 2009, the national median house price dropped by 29%.34 ## How Long Did the 2008 Housing Market Crisis Last? Different geographic areas recovered at different speeds. However, in general, the recovery began in 2011, more than three years after the housing crisis began. Home prices had fully recovered by 2012.35 ## The Bottom Line The 2008 financial crisis serves as a stark reminder that financial innovation without proper oversight can have devastating consequences. What began with a housing bubble and risky mortgage lending practices escalated into a global financial meltdown through complex financial products and inadequate regulation. While new safeguards and regulations make an exact repeat of 2008 less likely, the crisis offers enduring lessons about the dangers of excessive risk-taking, the importance of transparency in financial markets, and the interconnected nature of global finance. Perhaps most importantly, it demonstrates how problems in seemingly isolated market segments can quickly spread to threaten the entire financial system, affecting everyone from Wall Street bankers to Main Street homeowners.

ML Classification

ML Categories

/Finance		99.2%
/Finance/Investing		92.9%
/Finance/Investing/Stocks_and_Bonds		89.5%

Raw JSON

{
    "/Finance": 992,
    "/Finance/Investing": 929,
    "/Finance/Investing/Stocks_and_Bonds": 895
}

ML Page Types

/Article		99.9%
/Article/News_Update		74.6%

Raw JSON

{
    "/Article": 999,
    "/Article/News_Update": 746
}

ML Intent Types

Informational

99.9%

Raw JSON

{
    "Informational": 999
}

Content Metadata

Language

Author

null

Publish Time

not set

Original Publish Time

2017-11-15 21:06:17 (8 years ago)

Republished

Word Count (Total)

5,231

Word Count (Content)

3,819

Links

External Links

Internal Links

159

Technical SEO

Meta Nofollow

Meta Noarchive

Yes

JS Rendered

Yes

Redirect Target

null

Performance

Download Time (ms)

294

TTFB (ms)

195

Download Size (bytes)

132,150

Shard

148 (laksa)

Root Hash

7273739457760125548

Unparsed URL

com,investopedia!www,/articles/economics/09/subprime-market-2008.asp s443