THE US HOUSING BUBBLE

Question 1

U.S. Housing Bubble
Period:

Answer 1

Mid-2000s leading to the 2008 financial crisis.

Question 2

U.S. Housing Bubble
Event

Answer 2

Investors saw mortgages as a safe investment, leading to the creation of mortgage-backed securities (MBS).

Question 3

U.S. Housing Bubble
Cause:

Answer 3

Banks offered risky subprime mortgages to borrowers with bad credit, bundled them into MBS, and sold them to investors. Greed and lack of regulation led to a housing bubble, which burst when borrowers defaulted on their loans.

Question 4

2 EFFECTS

Answer 4

Economic Collapse: The collapse of the housing market caused a global financial crisis, leading to massive job losses, foreclosures, and bankruptcies.

Loss of Trust: The scandal exposed major flaws in the financial system, eroding public trust in banks and financial institutions worldwide.

Question 5

Principles Ignored:
Banks aggressively offered loans to risky borrowers, focusing on short-term profits rather than long-term stability.

Answer 5

Curse of Competitive Markets:

Question 6

Principles Ignored:
Investors focused too heavily on mortgage-backed securities, failing to diversify, which led to huge losses when the housing market collapsed.

Answer 6

All Risks Are Not Equal:

Question 7

Principles Ignored:
Greed led banks and credit agencies to ignore ethical standards, prioritizing profit over the potential harm to the market, ultimately triggering a financial crisis.

Answer 7

Ethical Behavior: