Credit Crisis

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)

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