The Begining of the Financial Crisis.

A multitude of things caused the current financial crisis. The Clinton Administration enacted a new policy on home ownership during their tenure. This mandated that mortgage institutions expand the amount of subprime loans they gave out. The amount of subprime loans has since skyrocketed. Subprime mortgages are mortgages for people with bad credit scores and the inability to pay their monthly payments. The Bush administration then continued to support this policy of expanded home ownership, if he went against this policy he would be seen as a president against the poor. Housing speculation went through the roof, and people began buying and selling houses with borrowed money because credit was so easily available. Housing prices were driven so high that in some places, houses sold for double their actual worth. Then the housing bubble burst, and prices bottomed out as people could no longer sell and buyers were scarce. This caused defaults on mortgages and an increase in foreclosures nationwide. As this was occurring, mortgage companies packaged these securities as investments, and sold them to investors, which eventually turned “bad.” With many subprime mortgages going into foreclosure, the value of these securities greatly diminished and investors lost vast sums of money; most notably Lehman Brothers. As soon as this happened it set off a chain reaction in the economy, and the stock market plunged. Soon American International Group (AIG) was affected because they insured these bad securities and went bankrupt; AIG is the world’s largest insurance company and insures a variety of things worldwide. The government then stepped in and acquired AIG, and took over 80 percent of its equity. If went AIG went completely under, there would dire consequences worldwide. In the first three weeks of the financial crisis the American economy lost more than 1 trillion dollars in wealth. This occurred because Congress failed to act quickly on the bailout plan. This sent investors on a sell-off the stock market on record drops. Had the first bailout package not been passed as quickly as it was, people would have woken up the next day and they would have encountered empty ATMs. The panic has caused many firms to go bankrupt, weeding out the weakest, least productive ones.

Now with Barack Obama as President we have seen Government drastically expand, along with more bailout packages filled with earmarks or "pork"- something Obama ran against.

Oh and did Barack Obama just triple the Deficit.

Yes he did.