• Banks, securities firms and other financial institutions had invested heavily in the booming housing market of the early 21st century. When the housing market began to falter, so did the banks. Banks did not have enough capital assets to borrow and lend money. When the securities company Bear Stearns folded, other banks began to follow at a record rate and home foreclosures continue to increase.FDIC: Bank Failures & AssistanceDallas Morning News: Fed cuts rate, aids in buyout (March 17, 2008)

• Fast Facts

  1. Banks are insured by the FDIC, but securities firms and mutual fund firms are notFDIC: FAQ
  2. Believed to be caused by a combination of subprime mortgage lending, unethical lending and business practices and the subsequent insolvency of major banks and lendersKAIT 8 (Jonesboro, AK): The Credit Crisis: 1 Year Old, and Growing (August 1, 2008)
  3. The Fed has lent and continues to lend money to certain financial institutions to attempt to lessen the impact of the crisis
  4. Rate of inflation has increased during the crisisThe Economic Times: Growth, inflation worries box in Fed (August 5, 2008)
  5. More than 1 million homes currently in foreclosureCNN Money: Homes in foreclosure top 1 million (June 5, 2008)
  6. At least 11 banks have closed since 2007FDIC: Bank Failures & Assistance

• Tipping Point

  Although the subprime mortgage crisis began before 2007, the demise of securities firm Bear Stearns on August 1, 2007, is generally thought to be the start of the credit crisis. Up to that point, individuals were facing foreclosures at record numbers but financial institutions had not been as affected. When JP Morgan bought Bear Stearns, it set off a cascade effect that worsened the subprime mortgage crisis.KAIT 8 (Jonesboro, AK): The Credit Crisis: 1 Year Old, and Growing (August 1, 2008) As of August, 2008, more than 10 banks had folded.FDIC: Bank Failures & Assistance

• Related Mahalo Pages

  Mortgages | High-Risk Mortgages | Housing Bubble | Subprime Mortgage Bailout | Countrywide Foreclosures | Citigroup Crisis | Bear Stearns | First National Bank of Nevada | Charles Nenner | Federal Reserve | FDIC | Retail Sales Forecast | U.S. Department of the Treasury | How to Get a Free Credit Report | Ruth Madoff | How to Get a Credit Card With Bad Credit | How to File for Unemployment in New York | How to Get a Home Equity Line of Credit | How to Survive a Financial Collapse

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