The 2007-2008 American financial crisis is considered one of the worst financial crises since the Great Depression of the 1930s. It nearly caused the collapse of major financial institutions and a spectacular fall in stock markets around the world. Consumer wealth declined by billions of US dollars and played a significant role in the bankruptcy of key businesses and decline in economic activities. All of these factors led to the global recession of 2007-2008 and played a major role in the European sovereign debt crisis. Easy access to credit in the United States, the Russian debt crises, and the Asian financial crises of the late 1990s paved the way for a construction boom in the United States. The relaxation of lending rules and the increase in real estate prices as well as the increase in foreign funds helped generate this real estate bubble. There was an increase in housing and credit, mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), which was driven by housing prices and mortgages. Investors from all over the world have invested in the American real estate market. Prices then began to fall and the large financial institutes which were the main investors in subprime MBS lost heavily. As a result, real estate prices began to fall rapidly, leading to foreclosures. The foreclosure problem began in late 2006 in the United States and has continued to drain wealth from consumers and banking institutions. This affected other types of loans and defaults on these loans increased enormously and the crisis deepened and began to affect other parts of the economy. The root cause of financial crises collectively lies in debt and mortgage-backed assets. Since the Great Depression, US housing prices have consistently increased...... middle of paper...... I don't want more CDOs on their balance sheet in return. This panic caused the crisis. These crises brought the global financial system to the point of collapse. The US Federal Reserve has taken steps to increase the money supply. The United States spent nearly a trillion dollars on two stimulus packages in 2008/2009. The Federal Reserve's reaction was immediate. In the last quarter of 2008, central banks purchased $2.5 trillion in private debt securities and assets from banks. This is the largest liquidity insertion into the credit market and the largest monetary policy measure in world history. The U.S. and European governments increased the capital of their national banking systems by $1.5 trillion by purchasing newly issued preferred shares in their major banks. Governments have also bailed out many companies by assuming their heavy financial obligations..