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Financial crisis of 2007–2008

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Banking crisis: -capitalization
 
===Banking crisis===
High mortgage approval rates led to a large pool of homebuyers, which drove up housing prices. This appreciation in value led large numbers of homeowners (subprime or not) to borrow against their homes as an apparent windfall. This "bubble" would be burst by a rising Singlesingle-Familyfamily Residentialresidential Mortgagesmortgages Delinquencydelinquency Raterate (beginning in August 2006 and peaking in the first quarter, 2010).<ref>{{cite web|publisher=Board of Governors of the Federal Reserve System (US)|title=Delinquency Rate on Single-Family Residential Mortgages, Booked in Domestic Offices, All Commercial Banks [DRSFRMACBS]|via=FRED, Federal Reserve Bank of St. Louis|url=https://fred.stlouisfed.org/series/DRSFRMACBS|accessdate=December 28, 2016}}</ref>
The high delinquency rates led to a rapid devaluation of financial instruments (mortgage-backed securities including bundled loan portfolios, derivatives and credit default swaps). As the value of these assets plummeted, the market (buyers) for these securities evaporated and banks who were heavily invested in these assets began to experience a liquidity crisis. [[Freddie Mac]] and [[Fannie Mae]] were taken over by the federal government on September 7, 2008. [[Lehman Brothers]] filed for bankruptcy on September 15, 2008. [[Merrill Lynch]], [[AIG]], [[HBOS]], [[Royal Bank of Scotland]], [[Bradford & Bingley]], [[Fortis (finance)|Fortis]], [[Hypo Real Estate]], and [[Alliance & Leicester]] were all expected to follow – with a U.S. federal bailout announced the following day beginning with $85 billion to AIG. In spite of trillions<ref>{{cite news|url=https://www.forbes.com/sites/mikecollins/2015/07/14/the-big-bank-bailout/|date=July 14, 2015|title=The Big Bank Bailout|first=Mike|last=Collins|work=Forbes}}</ref> paid out by the US federal government, it became much more difficult to borrow money. The resulting decrease in buyers caused housing prices to plummet.
The high delinquency rates led to a rapid devaluation of financial instruments (mortgage-backed securities including bundled loan portfolios, derivatives and credit default swaps). As the value of these assets plummeted, the market (buyers) for these securities evaporated and banks who were heavily invested in these assets began to experience a liquidity crisis. [[Freddie Mac]] and [[Fannie Mae]] were taken over by the federal government on September 7, 2008. [[Lehman Brothers]] filed for bankruptcy on September 15, 2008. [[Merrill Lynch]], [[AIG]], [[HBOS]], [[Royal Bank of Scotland]], [[Bradford & Bingley]], [[Fortis (finance)|Fortis]], [[Hypo Real Estate]], and [[Alliance & Leicester]] were all expected to follow – with a U.S. federal bailout announced the following day beginning with $85 billion to AIG. In spite of trillions<ref>{{cite news|url=https://www.forbes.com/sites/mikecollins/2015/07/14/the-big-bank-bailout/|date=July 14, 2015|title=The Big Bank Bailout|first=Mike|last=Collins|work=Forbes}}</ref> paid out by the U.S. federal government, it became much more difficult to borrow money. The resulting decrease in buyers caused housing prices to plummet.
 
===Consequences===
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