You will get all kinds of opinions on what caused the financial meltdown that began in 2008. Some blame evil bankers, some blame government, others blame Wall Street, and on and on.
The real cause, according to a report released Monday by the Federal Deposit Insurance Corp., was the housing boom, loose credit and rampant speculation.
Here's the first paragraph from the FDIC's report:
“The U.S. financial crisis of 2008 followed a boom and bust cycle in the housing market
that originated several years earlier and exposed vulnerabilities in the financial system. As is typical of boom and bust cycles, this boom was characterized by loose credit, rampant speculation, and general exuberance in the outlook for the market—in this instance, the housing market. The subsequent downturn began as a housing crisis that initially seemed to be concentrated in certain states and in the subprime mortgage market. Eventually, however, the seemingly circumscribed housing collapse spread to the entire U.S. housing market, as house prices declined nationwide. And because the financial system had been integral to the housing boom, it was highly exposed to the housing market, whose downturn would prove to be so severe that it threatened to drag down the financial system with it in the absence of significant government intervention. Inexorably, the collapse of the U.S. housing market in 2007 became the most severe financial crisis since the Great Depression, and the financial crisis, in turn, resulted in a protracted economic contraction—the Great Recession—whose effects spread throughout the global economy.”
The FDIC's report is good reading for those who actually care about the real causes of the financial crash.