Crash of 2008

This article presents preliminary accounts of the sequence of events leading to the 2007-2008, of rival explanations for the crisis, of possible contributory factors, and of proposed remedies.

A detailed account of the sequence of events is set out on the Timelines subpage, together with links to contemporary news reports. Terms shown in brackets in the text are defined on the Related Pages subpage.

Rival explanations

A widely-held explanation of the crisis treats it as a fallout from the United States subprime mortgage crisis. For example, the explanation offered in September 2008 by the United States government can be summarised as follows.

Inflows of money from abroad -- along with low interest rates -- enabled more United States consumers and businesses to borrow money. Easy credit -- combined with the faulty assumption that house prices would continue to rise -- led mortgage lenders there to approve loans without due regard to ability to pay, and borrowers took out larger loans than they could afford. Optimism about prices also led to a boom in which more houses were built than people willing to buy, so that prices fell and borrowers - with houses worth less than they expected and payments they could not afford - began to default. As a result, holders of mortgage-backed securities began to incur serious losses, and those securities became so unreliable that they could not be sold. Investment banks were consequently left with large amounts of unsaleable assets, and many failed to meet their financial obligations. Arrangements for inter-bank lending went out of use, and banks through out the world cut back upon lending .