President George W. Bush discusses Education, Entrepreneurship & Home Ownership at the Indiana Black Expo in 2005
World map showing real GDP growth rates for 2009; countries in brown were in a recession.
Repurchase agreement or "Repo" transaction components. In step one, the investor provides $80 cash and receives $100 in collateral, typically bonds. In step two, the borrower buys back the collateral, paying the investor their initial cash plus an interest amount. The "repo rate" is the interest rate received by the investor, in this case (88-80)/80 = 10%, while the "Haircut" is a ratio of the cash loan to collateral (100-80)/100 = 20%.
Subprime mortgage lending jumped dramatically during the 2004–2006 period preceding the crisis (source: Financial Crisis Inquiry Commission Report, p. 70, Fig. 5.2)
A bank run at a branch of the Northern Rock bank in Brighton, England, on September 14, 2007, amid speculation of problems, prior to its 2008 nationalisation.
Composition of SOFR Rate
Federal funds rate history and recessions
U.S. residential and non-residential investment fell relative to GDP during the crisis
Secured Overnight Financing Rate or SOFR, a proxy for the overnight repo interest rate. During September 2019, the SOFR significantly increased, resulting in intervention by the U.S Federal Reserve.
Factors contributing to housing bubble
U.S. households and financial businesses significantly increased borrowing (leverage) in the years leading up to the crisis
Domino effect as housing prices declined
US household debt relative to disposable income and GDP.
Housing price appreciation in selected countries, 2002–2008
U.S. Changes in Household Debt as a percentage of GDP for 1989–2016. Homeowners paying down debt for 2009–2012 was a headwind to the recovery. Economist Carmen Reinhart explained that this behavior tends to slow recoveries from financial crises relative to typical recessions.
U.S. households and financial businesses significantly increased borrowing (leverage) in the years leading up to the crisis.
Housing price appreciation in selected countries, 2002–2008
U.S. residential and non-residential investment fell relative to GDP during the crisis
Securitization markets were impaired during the crisis.
Household debt relative to disposable income and GDP
Several major U.S. economic variables had recovered from the 2007–2009 Subprime mortgage crisis and Great Recession by the 2013–2014 time period.
Existing homes sales, inventory, and months supply, by quarter
U.S. Real GDP – Contributions to Percent Change by Component 2007–2009
Vicious cycles in the housing and financial markets
Public Debt to GDP Ratio for Selected European Countries – 2008 to 2011. Source Data: Eurostat
A mortgage brokerage in the US advertising subprime mortgages in July 2008
Relationship between fiscal tightening (austerity) in Eurozone countries with their GDP growth rate, 2008–2012
Historically less than 2% of homebuyers lost their homes to foreclosure. But by 2009 over 40% of subprime adjustable rate mortgages were past due. (source: Financial Crisis Inquiry Report, p.217, figure 11.2)
Slovenian anarchist anti-fascist protest due to the great recession.
Growth in mortgage loan fraud based upon US Department of the Treasury Suspicious Activity Report Analysis
Sydney's financial district at night. Throughout the Great Recession, the Australian economy remained resilient and stable.
Number of U.S. residential properties subject to foreclosure actions by quarter (2007–2012)
The anti-austerity movement in Spain, May 2011
Comparison of the growth of traditional banking and shadow banking
Federal Reserve Holdings of Treasury and Mortgage-Backed Securities
Borrowing under a securitization structure
Bank bailouts in the United Kingdom and in the United States in proportion to their GDPs.
IMF diagram of CDO and RMBS
Leverage ratios of investment banks increased significantly between 2003 and 2007.
MBS credit rating downgrades, by quarter
U.S. Subprime lending expanded dramatically 2004–2006.
Franklin Raines earned $90 million in salary and bonuses while he was head of Fannie Mae.
Federal funds rate and various mortgage rates
U.S. current account or trade deficit through 2012
Securitization markets were impaired during the crisis.
The TED spread (the difference between the interest rates on interbank loans and on the safer short-term U.S. government debt) – an indicator of credit risk – increased dramatically during September 2008.
Impacts from the crisis on key wealth measures
U.S. Real GDP – Contributions to percent change by component 2007–2009
Public debt to GDP ratio for selected European countries – 2008 to 2012. Source Data: Eurostat
Relationship between fiscal tightening (austerity) in Eurozone countries with their GDP growth rate, 2008–2012
This chart compares U.S. potential GDP under two CBO forecasts (one from 2007 and one from 2016) versus the actual real GDP. It is based on a similar diagram from economist Larry Summers from 2014.
U.S. savings and investment; savings less investment is the private sector financial surplus
Sectoral financial balances in US economy 1990–2017. By definition, the three balances must net to zero. Since 2009, the US foreign surplus (trade deficit) and private sector surplus have driven a government budget deficit.
Federal Reserve holdings of treasury (blue) and mortgage-backed securities (red)
Common equity to total assets ratios for major US banks
People queuing outside a Northern Rock bank branch in Birmingham, United Kingdom, on September 15, 2007, to withdraw their savings because of the subprime crisis.
U.S. Changes in Household Debt as a percentage of GDP for 1989–2016. Homeowners paying down debt for 2009–2012 was a headwind to the recovery. Economist Carmen Reinhart explained that this behavior tends to slow recoveries from financial crises relative to typical recessions.
U.S. federal government spending was held relatively level around $3.5 trillion from 2009-2014, which created a headwind to recovery, reducing real GDP growth by approximately 0.5% per quarter (annualized) on average between Q3 2010 and Q2 2014.
Several major U.S. economic variables had recovered from the 2007–2009 Subprime mortgage crisis and Great Recession by the 2013–2014 time period.
U.S. median family net worth peaked in 2007, declined due to the Great Recession until 2013, and only partially recovered by 2016.

Declines in residential investment preceded the Great Recession and were followed by reductions in household spending and then business investment.

- Subprime mortgage crisis

In 2007–2008, a run on the repo market, in which funding for investment banks was either unavailable or at very high interest rates, was a key aspect of the subprime mortgage crisis that led to the Great Recession.

- Repurchase agreement

This 2007–2008 phase was called the subprime mortgage crisis.

- Great Recession

Examples of vulnerabilities in the private sector included: financial institution dependence on unstable sources of short-term funding such as repurchase agreements or Repos; deficiencies in corporate risk management; excessive use of leverage (borrowing to invest); and inappropriate usage of derivatives as a tool for taking excessive risks.

- Great Recession

Examples of vulnerabilities in the private sector included: financial institution dependence on unstable sources of short-term funding such as repurchase agreements or Repos; deficiencies in corporate risk management; excessive use of leverage (borrowing to invest); and inappropriate usage of derivatives as a tool for taking excessive risks.

- Subprime mortgage crisis
President George W. Bush discusses Education, Entrepreneurship & Home Ownership at the Indiana Black Expo in 2005

1 related topic with Alpha

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Securitization markets were impaired during the crisis

Shadow banking system

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Term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but outside normal banking regulations.

Term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but outside normal banking regulations.

Securitization markets were impaired during the crisis

Shadow banking has grown in importance to rival traditional depository banking, and was a factor in the subprime mortgage crisis of 2007–2008 and the global recession that followed.

It is unclear to what extent various measures of the shadow banking system include activities of regulated banks, such as bank borrowing in the repo market and the issuance of bank-sponsored asset-backed commercial paper.