Question

What were the key triggers of the 2008-2009 financial crisis, and what were the main characteristics of that financial crisis?

Answer 1

The key triggers of 2008-2009 financial crisis is default of subprime mortgages. Subprime mortgages are those mortgages that are given to those customers who have low creditworthiness or are doubtful of getting default in repayment of loan amount. The pool of mortgages was repacked into mortgage backed securities that were sold to other institutional investors. Thus, when the customer gets default in repayment of loans, it leads to subprime crisis as most of the institutional investors invested in those mortgage backed securities.

The main characteristics of financial crisis are loss of faith in banks and financial institutions, loss of job and economic downturn which slow down the economic activities on the nation. Many banks goes into bankruptcy due to 2008-2009 financial crisis.