Two thousand eight found the American economy in turmoil. The housing market made a dramatic incline which caused an increase in foreclosures. The major investment banks took a huge fall and the stock markets fare no better either. These were events that leaded up to the economic crisis of 2008. There were three major government incentives that were implemented; the Housing and Urban Development policy, Reinvestment Act, and the Federal’s low interest rate policy. These were the incentives that the government provided that ultimately caused the economic crisis of 2008.
During the mid-1900s the government set up regulations to help Americans own homes and this made it possible for lenders to lend money to everyone, regardless of income. This was the American dream that people work so hard for. So when it was made possible by the government regulations, there was no stopping Americans from jumping on that wagon. The home owing process was made possible by HUD (Department of Housing and Urban Development) regulations that required lenders like Fannie Mae and Freddie Mac to accept loans with little or no interest down (Pozen, 2010, p. 28). The loans held by Freddie Mac and Fannie Mae went from 25% in 1990 to 45% in 2001 (Gwartney et al., 2008, pg. 481). They owe about half of the United States’ mortgage markets....
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