The Great Recession—sometimes referred to as the 2008 Recession—in the United States and Western Europe has been linked to the so-called “subprime mortgage crisis.”
Subprime mortgages are home loans granted to borrowers with poor credit histories. Their home loans are considered high-risk loans.
With the housing boom in the United States in the early to mid-2000s, mortgage lenders seeking to capitalize on rising home prices were less restrictive in terms of the types of borrowers they approved for loans. And as housing prices continued to rise in North America and Western Europe, other financial institutions acquired thousands of these risky mortgages in bulk (typically in the form of mortgage-backed securities) as an investment, in hopes of a quick profit.
These decisions, however, would soon prove catastrophic.
Although the Great Recession was officially over in the United States in 2009, among many people in America and in other countries around the world, the effects of the downturn were felt for many more years.
Indeed, from 2010 through 2014, multiple European countries including Ireland, Greece, Portugal and Cyprus a defaulted on their national debts, forcing the European Union to provide them with “bailout” loans and other cash investments.
These countries were also compelled to implement “austerity” measures such as tax increases and cuts to social benefit programs (including healthcare and retirement programs)—to repay their debts.
Subprime mortgages are home loans granted to borrowers with poor credit histories. Their home loans are considered high-risk loans.
With the housing boom in the United States in the early to mid-2000s, mortgage lenders seeking to capitalize on rising home prices were less restrictive in terms of the types of borrowers they approved for loans. And as housing prices continued to rise in North America and Western Europe, other financial institutions acquired thousands of these risky mortgages in bulk (typically in the form of mortgage-backed securities) as an investment, in hopes of a quick profit.
These decisions, however, would soon prove catastrophic.
Although the Great Recession was officially over in the United States in 2009, among many people in America and in other countries around the world, the effects of the downturn were felt for many more years.
Indeed, from 2010 through 2014, multiple European countries including Ireland, Greece, Portugal and Cyprus a defaulted on their national debts, forcing the European Union to provide them with “bailout” loans and other cash investments.
These countries were also compelled to implement “austerity” measures such as tax increases and cuts to social benefit programs (including healthcare and retirement programs)—to repay their debts.
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