Great Recession

Overview

Caused by factors including risky subprime mortgage lending and a lack of financial regulation, the "Great Recession" refers to the economic downturn that occurred during a roughly 18-month period between 2007 and 2009. It had a significant impact on everyday Americans, with the unemployment rate more than doubling from less than 5% to 10%, foreclosures rising about 800% among prime borrowers, and SNAP food stamp enrollment surging from about 26 million people to over 40 million.

Leading up to 2008, home prices had been artificially inflated for years, driven by speculation and loose lending. Many nonbank lenders began approving subprime mortgages—which often came with low initial interest rates that reset to a higher rate after a set period—for homebuyers who didn't meet traditional requirements.

On Wall Street, mortgages were often considered low-risk investments, with many being packaged together and sold as a single financial asset. But when adjustable mortgage rates reset higher, homeowners began defaulting en masse—causing home prices to fall more than 20% nationally and mortgage-backed securities to deteriorate.

The idea that many of these financial institutions were "too big to fail" ultimately prompted the government to pump more than $400B into the financial system through the Troubled Asset Relief Program bank bailout.

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The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.

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Great Recession

Overview

1440 Findings

Explore Business & Finance

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