ABOUT THE GREAT RECESSION

It has happened in the year 2008. It all started with the funding of Russian and other Asian countries in American countries. With the funding American banks had started to provide loans to the people with no credit score. Credit score is nothing but score given to a citizen based on the transactions made by him. In India basically we get to know the score of a individual citizen by checking his bank details with RBI. This is done through AADHAR. In this way credit score is givem by the bank based on their account transcations. I fthe credit score is above certain number then they are provided loan or EMI for a product. Since the funding was in huge amounts they started providing these loans to the people with low credit scores also. Since it is every american dream to have a own house everybody used this oppurtunity to construct thier own houses. This is called as SUBPRIME MORTGAGE. This has started increasing in Housing prices. Every loan given to the people is made into a bond. SInce every bank has make some over these bonds they sold these bonds to other companies. They collected a group of bonds and made them as a COLLATERISED DEBT OBLIGATION bond(CDO bond). But every bond has some risk factors since people doesn't buy these bonds with risk factors they wanted a insurance company to involve so that they can insure instead everything goes wrong. Here comes AIG this is the insurance company which provided insurance to others who are buying these bonds from banks. Every bank fears of the credit score, so AIG tricked by using its own ranking method. So people can know the scores but not about it. So banks started buying these bonds based on AIG ranking. This is called CREDIT DEFAULT SWAP. Peopl started to buy in heavy amounts on par with the situation AIG selling that many bonds without thinking if something goes worng they can pay or not. Since after people get to know that the housing rates are high above they stopped buying and getting loans. This started the recession. This had made the banks to sell those bonds. At some time housing market fell beyond expectations. Since AIG has to take responsibility and pay these banks it has left with no money. This is the Great recession in history. Since AIG has many connections with other countries American government has taken responsibility and they used the federal reserve to pay the debts. It amounts of $182 million dollars. This is most of the money paid by the bank in hostory of america. In this way America protected itself and world from the Great Recession.