Question

What are in your opinion the main three causes of the subprime mortgage crisis and the subsequent financial crisis of 2008?

Answer 1

Three reasons of subprime mortgage crisis and the subsequent financial crisis of 2008 were-

A. Credit rating agencies were issued standard rating to sub-standard product who were disguised as investment grade product, so that was bought by the public at the chunk.

B. Exposure of bank into the derivative market was also another reason for the financial crisis as banks were highly exposed to the deviation of the futures and options markets through credit default swaps.

C. Bad Management by the Federal Reserve and not being a proactive Central Bank, in order to to decide the effect of the contagian in the whole economy of inflating bubble in the real estate prices.