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Community Reinvestment Act Essay

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“When the US sneezes, the world catches a cold” (Keating). The 2008 economic crisis didn’t occur suddenly. Signs started to appear in 2004, with the steadily increase in housing prices, when “subprime lending” was generally practiced. Subprime lending is the practice of lending loans to people who may have difficulty maintaining the repayment schedule which sometimes reflects setbacks, such as unemployment, divorce, medical emergencies, and more. Banks would usually lend out loans for an interest rate 100% or more for the values of their houses. Most realtors thought that the prices would have returned to a maintainable level, however, they failed to realize the amount of unreliable loaners (Amadeo). Many people began to lose their trust in the banks and their government, and started to criticizing the Community Reinvestment Act. The Community Reinvestment Act encourages citizens to put more of their money into banks in order to help surrounding communities grow (Community Reinvestment …show more content…
Housing prices fell 31.8%, which is more in comparison to the Great Depression. Both events had similar causations, such as; the flourishing American economy, stocks were being bought and sold, and credit scores were increasing. Both events were different, but more so similar. The great depression was an effect of world war 1, it first began in the United States and eventually spread globally, the stock market crashed in October 1929, ¨which sent the Wall Street into panic and wiped out millions of investors¨ (“Great Depression”). As a result, a multitude of workers were being laid off, the unemployment rate was at a all time high. The depression did not have as much of an impact in Japan, Latin America and countries with economic sanctions. This event had an effect on countries globally because there were ¨declines in consumer demand, financial panics caused economic output to fall¨ (Romer and

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