The Financial Crisis Of 2008 - 1125 Words

A mortgage meltdown and financial crisis of unbelievable magnitude was brewing and very few people, including politicians, the media, and the poor unsuspecting mortgage borrowers anticipated the ramifications that were about to occur. The financial crisis of 2008 was the worst financial crisis since the Great Depression; ultimately coalescing into the largest bankruptcies in world history--approximately 30 million people lost their jobs, trillions of dollars in wealth diminished, and millions of people lost their homes through foreclosure or short sales. Currently, however, the financial situation has improved tremendously. For example, the unemployment rate has significantly improved from 10 percent in October of 2009 to five percent in†¦show more content†¦The Glass-Steagall Act, which was implemented in 1933, was enacted in response to the abuses by the banks prior to the stock market crash of 1929. The law separated commercial banks and investment banks: the commercial banks would be allowed to take deposits and make loans and investment brokers were allowed to underwrite and sell securities. The law worked well for the most part from 1933-1999. Then in 1999, The Gramm-Leach-Bliley Act of 1999 allowed commercial and investment banks to merge. After GLB was passed, it did not take long for the deregulation to cause many banks and Wall Street to take advantage of the situation. The banks began to generate very risky and fraudulent loans and then bundled and sold them worldwide as solid mortgage backed securities on Wall Street. Inevitably, of course, these securities catostrophically changed our world economy for the worst. Subsequently, though, a silver lining emerged iin July of 2010, the Dodd-Frank regulatory reform bill was passed to reduce the chance of this happening again. Although the Dodd-Frank reform bill is a step in the right direction, the measure does not go far enough. Many believe that the only solution is to bring back Gla ss-Steagall. Mortgage products should be more easily understood by all borrowers. Furthermore, borrowers must be able to qualify for the mortgage and borrowers should have a payment that they