Great Recession

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 by 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.