Over the past few years, banks, hedge funds, and investment banks (now defunct) have written off billions (or trillions) in bad loans. Like many other financial crises, the financial crisis started with a significant increase in lending using a relatively new lending channel (securitized mortgage loans made by non-banks) with little or no regulatory oversight.
The Federal Reserve in the US attempted to calm markets by increasing liquidity and serving as a lender of last resort. Moreover, the U.S. government “rescued” Fannie Mae and Freddie Mac along with AIG, numerous investment banks, commercial banks, and possibly three big automakers.

Provide a detailed explanation of the causes and consequences associated with the financial crisis experienced in the US.

Answer rating: 100% (QA)

The main cause of the financial crisis in the US was a combination of loose lending standards high leverage and overreliance on securitization The loo... View the full answer