How didthe wall street crash happen?
Here’s an over-simplified answer: The problem started with the Community Reinvestment Act of 1975, when the US government encouraged banks and mortgage companies to make home-loans to unqualified people. They did this with good intentions, but banks and mortgage companies often offered Adjustable Rate Mortgages with attractive, “teaser” rates, which were scheduled to go up later. In addition, they didn’t verify incomes and other information on applications because they made “extra” money on these loans by bundling them, and selling them to other institutions like investment banks. As a result, people who couldn’t really afford a house were able to buy one, and the housing market grew rapidly, so homes were constantly rising in value, making prices continually rise — AKA, the “Housing Bubble. The government set up Freddie Mac and Fanny Mae, corporations designed to guarantee risky mortgages. Banks, mortgage companies, Freddie Mac and Fanny Mae bundled these questionable loans and sold
