Egregoros

What actually happened in 2008? (I was young)

From what I loosely gather (heard, not claim), it was something about mortgage loans lended to applicants who couldn't afford them or mortgage interest rates suddenly rising on already established homeowners (I'm not sure how that one would be, unless mortgages weren't at fixed rates).

I really don't know because "explanatory" (exculpatory) articles play hot potato and shrug, and I wasn't old enough at the time.

Anyone here know?

@Ash_Kvetchum @grey In the 90s Bill Clinton got elected president on the promise of everyone being able to afford a house. However, this required extending credit to people who couldn't actually qualify for mortgages. To solve this, Clinton told the banks that the government through Fannie Mae and Freddie Mac would guarantee those mortgages. To banks this was a great deal because you could expand your assets (mortgages) while being confident that you would get paid at the end by the US government whether the borrowers were actually solvent or not. The subprime mortgages that came out of this arrangement found their way into the derivatives market, specifically the Collateralized Debt Obligation where subprime debt got mixed into prime debt and nobody could accurately access how risky those investments were anymore. Time passes, and suddenly Fannie Mae and Freddie Mac need to be saved because they can't afford to guarantee the mortgages they helped put out because so many started to fail all at once. And because mortgage-back securities made their way through the financial markets it caused a system cascade were securities rapidly dropped in value and caused further meltdowns.