| | | | There were many factors that lead to the financial crisis of 2008. In 2001 America was facing the possibility of a recession, in part due to the terrorism attack. Fearing this recession the Federal Reserve decided to cut interest rates drastically with the plan to slowly increase it over time. Banks and other financial institutions saw this as an opportunity to make money and used the low interest rate to capitalize in real estate. Banks began the spiral of offering no money down mortgages with the cheap money interest rates to subprime borrowers, many which had little money and no assets. As the real estate business began to boom the prices of houses increased. Many people felt a false sense of security in the value and asset of owning a home could offset the failing stock market. Banks began to repackage these loans into collateralized debt obligations and sold them out to other financial institutions creating complex chains of debts. As the interest rates increased as planed the risks began to unravel. By 2006 many borrowers were defaulting on mortgages they could no longer afford to sustain and the housing market began to decline. In 2007 feeling the financial effects of the bad loans; many institutions were showing hundreds of millions in losses and expecting more each day as more people defaulted on their loans. It was at that point the public panicked realizing that the economy was spiraling with no hope of recovery. Banks came to a financial halt and many began filing for bankruptcy.(Singh). With no other options available the Federal government was forced to step in and began devising a plan of both conventional and unconventional methods to repair the economy. The Obama administration reacted quickly within the first few months to push through several pieces of legislation to aid the crisis. The first piece of legislation was the American