How did the Great Recession start?

In simple terms how did the credit bubble (recession) in 2007 start?

• And how are we getting out of it in the UK??

• Answer:

  There are lots of theories. One is when the US passed a rule that the first $250K of capital gain on your home wouldn't be taxed if you sold. People were willing to pay more for a house if they expected to see it go up in value, and they could move and pocket the gain. The banking system stopped having oversight of loans. No underwriting of any kind. Want a house, sign here; Can't afford an interest only loan, negative amortization and balloon payments. No problem, you'll sell before you can't pay. Loan securitization. Local bank doesn't own the loan, they sell it to someone else who grades the loan AAA and sells it to an investor. Then, oops, someone can't sell and gets foreclosed on.