Friday

How did the financial crisis start?

Ever wondered how the financial crisis actually started? What on earth is Wall Street? How bad was the situation??

This post is going to focus on these issues which we are sure many could be wondering about..

1. How did the financial crisis come abt?

Basically in simple terms, it started from a problem termed as 'mortage backed security'. Traditionally, mortgages were held by banks, pension funds and insurance companies. Some financial genius had the idea of going around buying up these mortgages and putting them all together in one pile. Then they started to sell parts of the pile to other investors as mortgage backed securities. The idea was that each investor owned a little bit of thousands of mortgages rather than a large investment in one property.These securities became very popular because they offered a nice rate of return and were sold by some as an absolutely secure investment. As these securities become more popular the companies that put the mortgages together needed more and more mortgages, so they encouraged the lenders to let anyone buy a house. This led to a lot of people buying houses that they couldn't afford and started incurring large amount of debts.

Before you know it, these big investment companies and banks started facing major losses and couldn't cover them up. These were global companies which had shares and smaller based companies all over the world, hence leading to almost every country feeling the pinch from these losses. People started becomig jobless even the bankers. As these finance companies were main contributors to the economy of countries, world wide problems started surfacing. It seemed as though a repeat of the Great Depression was to be expected.

2. What is Wall Street?

Wall Street is a street in Lower Manhattan, New York, America. It is the first permanent home of the New York Stock Exchange; over time Wall Street became the name of the surrounding geographic neighborhood. Wall Street is also shorthand for the "influential financial interests" of the American financial industry, which is centered in the New York City area. Several major U.S. stock and other exchanges remain headquartered on Wall Street and in the Financial District, including the Lehman Brothers and City Bank.

3. How bad was the situation?

Ohh it was bad.. The financial crisis took a toll on the rich and poor. Everywhere from media sources to schools, everyone was talking about it. It was a period of uncertainty for many and people started to think twice about spending. Anything could happen. Everyday, millions would be waiting for news on a possible glimpse of hope.

Well thats all for today. The Recession Heroes will be back next time to share more on the situation in Singapore, tips on spending wisely and how we teenagers can do our part.

Thanks for reading!

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