The US 2008 Mortgage Backed Security Crash

Executive Summary

• This was a panic caused by the irresponsible creation and insuring of mortgage-backed securities.

Introduction

This crash was entirely due to improper regulation in the form of out-of-control lending standards, a lack of regulation of mortgage-backed securities (MBSs), or the insurance (CDOs) that allowed MBSs. The long-term erosion of already lenient banking and Wall Street regulations lead to a crash, a tab which was paid in the form of bailouts by taxpayers and lose homes by homeowners. The US financial system was made even more unstable after the crisis as banks were consolidated and no significant legislation was imposed on bad actors, nor was regulatory authority enhanced.