October 15, 2008 << Go to Main Page | Next >> The Current
Financial Crisis: How Did We Get Here? The Dow Jones Industrial
Average (DJIA) fell by more than 18% during the trading week of
October 6 th 2008, the largest one-week decline in the history
of the index. News reports of the failures of large mortgage
lending institutions in the U.S. have become commonplace. In
short, we are in the midst of a massive financial crisis. So how
exactly did we get here? The simplest and most direct answer to
how we got here is that, over the past few years, too many “bad”
mortgage loans were made in the U.S. Historically, mortgage
lending has been done through “local” savings and loan
institutions who lend money directly to people within their
communities. The traditional mortgage terms typically include a
fixed interest rate over a fixed term, and require a significant
down payment from the borrower to provide sufficient collateral
even if real-estate values decline. However, over the past 30-40
years the amount of debt o