How the 2008 financial crisis happened

Process map by Brian. 18 steps, 2 layers. Tags: finance, history, economics, banking.

1. Home buyers: Buy homes with little money down and cheap starting rates
2. Mortgage lenders: Approve risky loans because they will sell them anyway
3. Big Wall Street banks: Bundle thousands of mortgages into securities
4. Rating agencies: Stamp the safest slices AAA
5. Big Wall Street banks: Sell them to investors around the world, financed by short term borrowing
6. Home buyers: Rates reset higher and house prices stop rising
7. Home buyers: Do borrowers keep up with payments?
8. Mortgage lenders: Defaults rise and the securities lose value
9. Big Wall Street banks: Banks cannot tell who is holding the losses and stop lending to each other
10. Big Wall Street banks: Lehman Brothers fails and panic spreads
11. Government and central bank: Governments rescue banks and the central bank slashes rates
12. Home buyers: Millions lose jobs and homes in the Great Recession
13. Government and central bank: New rules force banks to hold more cash against risk
14. Big Wall Street banks: The boom continues for a while

Read this process as Markdown

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