Part 2/13:
To understand the current scenario, it’s essential to revisit how the 2008 crisis unfolded. The 2008 financial meltdown was primarily caused by the proliferation of risky subprime mortgages. Financial institutions aggressively issued these loans and bundled them into complex securities marketed as safe, low-risk investments. As housing prices declined, defaults surged, exposing massive vulnerabilities within the financial system.
Regulators failed to intervene in time, and credit rating agencies often overestimated the safety of these securities. Compounded by underregulated shadow banking systems, the situation escalated rapidly. The collapse of major firms like Lehman Brothers sent shockwaves through global markets, leading to a widespread credit freeze and a severe recession.