<P> The bursting of the US housing bubble , which peaked at the end of 2006 , caused the values of securities tied to US real estate pricing to plummet , damaging financial institutions globally . The financial crisis was triggered by a complex interplay of policies that encouraged home ownership , providing easier access to loans for subprime borrowers ; overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate ; questionable trading practices on behalf of both buyers and sellers ; compensation structures that prioritize short - term deal flow over long - term value creation ; and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making . Questions regarding bank solvency , declines in credit availability , and damaged investor confidence affected global stock markets , where securities suffered large losses during 2008 and early 2009 . Economies worldwide slowed during this period , as credit tightened and international trade declined . Governments and central banks responded with unprecedented fiscal stimulus , monetary policy expansion and institutional bailouts . In the US , Congress passed the American Recovery and Reinvestment Act of 2009 . </P>
<P> The bursting of the US housing bubble , which peaked at the end of 2006 , caused the values of securities tied to US real estate pricing to plummet , damaging financial institutions globally . The financial crisis was triggered by a complex interplay of policies that encouraged home ownership , providing easier access to loans for subprime borrowers ; overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate ; questionable trading practices on behalf of both buyers and sellers ; compensation structures that prioritize short - term deal flow over long - term value creation ; and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making . Questions regarding bank solvency , declines in credit availability , and damaged investor confidence affected global stock markets , where securities suffered large losses during 2008 and early 2009 . Economies worldwide slowed during this period , as credit tightened and international trade declined . Governments and central banks responded with unprecedented fiscal stimulus , monetary policy expansion and institutional bailouts . In the US , Congress passed the American Recovery and Reinvestment Act of 2009 . </P>
the u.s. government responded to the financial crisis with unprecedented
the u.s. government responded to the financial crisis with unprecedented
fiscal stimulus , monetary policy expansion and institutional bailouts
fiscal stimulus , monetary policy expansion and institutional bailouts