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2008 Financial Crisis and Government Response

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2008 Financial Crisis and Government Response

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Questions and Answers

What led to lax lending standards in the US housing market in the 2000s?

Stringent credit requirements for borrowers

Demand for mortgage-backed securities (MBS) (correct)

Increased government regulations

Decreased investor interest in real estate

What type of loans were commonly given to people with low income and bad credit during the housing bubble?

Fixed-rate mortgages with high credit score requirements

Government-backed loans with stringent conditions

Prime loans with low interest rates

Subprime loans with high risk levels (correct)

What was a common predatory lending practice during the 2000s housing market boom?

Utilizing adjustable-rate mortgages with low initial payments (correct)

Providing transparent loan terms for borrowers

Strictly adhering to conventional lending guidelines

Offering fixed-rate mortgages with long-term stability

What effect did the bursting of the housing bubble have on house prices?

Resulted in a significant drop in house prices Signup and view all the answers

What was the main reason behind creating the Troubled Asset Relief Program (TARP) by the government?

To stabilize the financial system during the crisis Signup and view all the answers

What did the Dodd-Frank financial reform bill aim to achieve following the 2008 crisis?

Enhance transparency and reduce risk-taking by banks Signup and view all the answers

How did investors mostly contribute to the housing bubble according to the text?

By buying mortgage-backed securities instead of individual loans Signup and view all the answers