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Financial crisis of 2007–2008

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First three listed factors were removed due to lack of academic consensus on their role in initiating the financial crisis.
===Subprime mortgage bubble===
The precipitating factor was a high default rate in the United States [[Subprime lending|subprime]] home mortgage sector. The expansion of this sector was encouraged by the following factors.
* Low interest rates.
* The [[Community Reinvestment Act]] (CRA),<ref>http://nbergman.scripts.mit.edu/docs/CRA.pdf</ref><ref>{{Cite web|title=The Clinton-Era Roots of the Financial Crisis|url=http://online.wsj.com/articles/SB10001424127887323477604579000571334113350}}</ref><ref>{{Cite web|title=Here's How The Community Reinvestment Act Led To The Housing Bubble's Lax Lending|url=http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6|website=businessinsider.com |access-date=December 22, 2016|last=Carney}}</ref><ref>{{cite web|url=https://www.ncsha.org/blog/unc-center-study-debunks-role-cra-housing-crisis|title=UNC Center Study Debunks Role of CRA in Housing Crisis - NCSHA|website=www.ncsha.org|accessdate=July 11, 2017}}</ref> a US federal law designed to help low- and moderate-income Americans get mortgage loans.<ref>{{cite web|url=https://www.federalreserve.gov/communitydev/cra_about.htm|title=The Fed - Community Reinvestment Act|website=federalreserve.gov|accessdate=July 11, 2017}}</ref>
* Many of these subprime (high risk) loans were bundled and sold, finally accruing to quasi-government agencies ([[Fannie Mae]] and [[Freddie Mac]]).<ref>https://object.cato.org/sites/cato.org/files/pubs/pdf/bp120.pdf</ref> The implicit guarantee by the US federal government created a [[moral hazard]] and contributed to a glut of risky lending.
* Securitization. Many mortgages were bundled together and formed into new financial instruments called [[mortgage-backed securities]], which could be sold as (ostensibly) low-risk securities partly because they were often backed by [[credit default swaps]] insurance.<ref>https://fisher.osu.edu/supplements/10/10402/credit-default-swaps-and-the-credit-crisis.pdf</ref> Because mortgage lenders could pass these mortgages (and the associated risks) on in this way, they could and did adopt loose underwriting criteria (due in part to outdated and lax regulation).
* Lax regulation also led to predatory lending in the private sector,<ref>{{Cite web|title=The 2008 Housing Crisis|url=https://www.americanprogress.org/issues/economy/reports/2017/04/13/430424/2008-housing-crisis|website=americanprogress.org|access-date=April 13, 2017}}</ref><ref>{{Cite web|title=Victimizing the Borrowers: Predatory Lending’s Role in the Subprime Mortgage Crisis|url=http://knowledge.wharton.upenn.edu/article/victimizing-the-borrowers-predatory-lendings-role-in-the-subprime-mortgage-crisis|website=knowledge.wharton.upenn.edu|access-date=February 20, 2008}}</ref> especially after the federal government overrode anti-predatory state laws in 2004.<ref>{{Cite web|title=Lest We Forget: Why We Had A Financial Crisi|url=https://www.forbes.com/sites/stevedenning/2011/11/22/5086/#10181f68f92f|website=forbes.com |access-date=November 22, 2011|last=Denning}}</ref>
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