2008 Mortgage Crisis The Domino Effect

The occurrences of 2008 were an accumulation of a series of events that had happened in the earlier years. The process began in 2001 after the recession caused by the Y2K scare. Becoming a home owner is considered one of the various accomplishments in achieving the American dream. In the early and mid-2000’s, this seemed like the perfect dream for every American and as expected, giving mortgage loans was a booming business for banks at the time. Real estate was highly valued and it was believed that the prices of homes would always have an upward trend. There are also other parties that played a major role in this crisis such as the lawmakers, insurance companies and business people. The government was also undergoing its own set of challenges in the early 2000’s.

More considerations were being put into the investments of technology and computers and this led to a downward trend of the economy. The American government was also suffering from the post war unemployment rates. It was easy for citizens to obtain mortgage loans and by 2006; the housing market was at its peak. Some had a low credit score and had a high rate of defaulting while others did not have enough income to enable them to pay up the mortgage interest. Law makers were also at fault because they had allowed banks to act as hedge funds earlier on. A lot of efforts were put into ensuring that the laws on savings and loans were not as strict and more people had the option of taking up loans.

If the laws had not been changed to suit the specific needs of the people, such a crisis would have been prevented. People would have taken up the loans according to their abilities but this did not happen because the laws had already been changed. The situation caused by the mortgage crisis had people arguing for and against bank bailout. Even though the problem cannot be squarely blamed on banks alones, they were the major lenders to consumers who were not fit to be given these loans. They did not pay enough attention to the consumers earning and purchasing power. The economy cannot remain of a standstill because there is nothing left to invest. If nothing is done about it, things will worsen because there will be no growth of the economy.

This will also enable relaxed payment terms for the mortgage interest which consumers had taken since two thirds of the US economy is driven by consumers. Their interests will be reduced and become affordable hence everyone will pay at the end of the day. Rev Jesse Jackson was of the opinion that the bank bailout should consider every citizen and be of benefit to not only the banks but also the consumers. He believed that the mortgage crisis should be bailed out using the tax dollars. He used the phrase ‘watering the roots,’ since consumers were the greatest contributors of the economy. Labaton, Stephen and Steven R. Weisman, “Housing bailout bill seems on shaky ground,” New York Times, 10th May 2008. Opposing Viewpoints in Context.