The financial crisis of 2007-08 was a severe contraction of liquidity in global financial markets, originating in the United States due to the collapse of the U.S. housing market. This crisis threatened to destroy the international financial system and led to the failure or near-failure of several major financial institutions, including investment and commercial banks, mortgage lenders, and insurance companies. The crisis precipitated the Great Recession (2007-09), which was the worst economic downturn since the Great Depression of the 1930s. Several factors contributed to the financial crisis. The Federal Reserve's significant reduction of the federal funds rate between 2000 and 2001 enabled banks to extend credit at lower rates, leading to a housing bubble. Changes in banking laws allowed banks to offer risky subprime mortgage loans , which were aggressively marketed to high-risk customers. The widespread practice of securitization, where banks bundled subprime mortgages and sold them as securities, further exacerbated the situation. The partial repeal of the Glass-Steagall Act in 1999 and the weakening of net-capital requirements in 2004 also played significant roles. The aftermath of the crisis was devastating. The net worth of American households declined by about $17 trillion, and the country's GDP was approximately 7 percent lower than it would have been without the crisis. Millions of jobs were lost, and the unemployment rate nearly doubled . Recovery was slow, especially for those who lost homes, businesses, or savings. Public resentment grew, particularly against bankers who faced little to no legal consequences. This resentment coalesced into the Occupy Wall Street movement in 2011, which highlighted economic inequality but did not result in significant reforms.
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The 2007-08 Financial Crisis: Causes, Key Events, and Aftermath

The financial crisis of 2007-08 was a severe contraction of liquidity in global financial markets, originating in the United States due to the collapse of the U.S. housing market.

This crisis threatened to destroy the international financial system and led to the failure or near-failure of several major financial institutions, including investment and commercial banks, mortgage lenders, and insurance companies. The crisis precipitated the Great Recession (2007-09), which was the worst economic downturn since the Great Depression of the 1930s.

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