Watch https://youtu.be/FDbPikepkiI The Ascent of Money - Human Bondage (Episode 2)
1. What caused the crisis? How could this have been prevented? (200 words)
2. Replied this opinion for 100 words "According to me i think there are so many reasons why there was a downfall of the US economy. Many things lead to the great recession of 2007-2008. Large foreign borrowings, bad monetary policy, bad lending process, no strict laws and many others factors led into crisis. Instead of getting so much of warning from economic experts and analyst Bush administration didn't responded in early times.
Banks were not worried about the credit worthiness of borrowers, if they couldn't pay the money they were just selling the mortgages into the secondary market. Loans were given to person who were not even qualified. As a result to which there were a large no:of defaulters and due to which the house prices started falling down and there were no one to invest in the mortgages. It even affected the people who were paying there money in time because, suppose if i bought a house for 100,000$ and due to the large no:of defaulters the house price are going down as no one wants to buy a house and even my house rate has also gone down to 80,000$, so it makes no sense for me to pay 100,000$ and the process caused the financial crisis.
The bush administration should have reduced the fiscal deficit that has come in foreign borrowings and they even could have acted to slow down the over heated economy.
The federal could have raised the borrowings rate the bring down the credit boom. Laws should have been made more strict, new regulation could have been made."