The subprime mortgage crisis was the initial cause of the 2008 financial crisis, which then led to the worst recession since the Great Depression. This primer tracks how the subprime crisis unfolded, flattening the real estate market, creating the 2007 banking crisis and finally leading to the global recession. Get the definitions for important terms. Understand how interest rates and real estate play an integral role in the U.S. economy. Uncover resources for those who need helpt from the effects of the subprime mortgage crisis.(Updated January 2, 2012)
Dec 06 - Downturn in Real Estate Threatens U.S. Economy
In December 2006, it was already apparent (at least to the readers of this website) that the real estate market threatened the U.S. economy. We just didn't know the cause - subprime mortgages - and how far subprime mortgages reached into the stock market and the overall economy.
Mar 07 - Hedge Funds Housing Losses Spread Subprime Misery
By March 2007, it became apparent that the housing slump was spreading to the stock markets via hedge fund investments.
Aug 07 - Federal Reserve Keeps Banks Afloat
By August, banks stopped lending to each other because they were afraid of getting caught with bad subprime mortgages. The Federal Reserve stepped in to restore liquidity and confidence. And stepped in. And stepped in.
Oct 07 - Credit Crisis Spreads Beyond Mortgages
By October, we learned about other debt packages, called collateralized debt obligations, that were also at risk. This speech by Federal Reserve Governor Kroszner explains why.
Nov 07 - Superfund to Save the Day?
In November, then Treasury Secretary Paulson convinced three banks, Citigroup, JPMorgan Chase and Bank of America, to set up a $75 billion superfund. It was managed by Blackrock Investments to buy distressed portfolios of defunct subprime mortgages. No one was interested and $75 billion was not nearly enough.
