The 2008 Recession

The 2008 Recession was a sharp downturn in economic activity, the most significant since the Great Depression itself. World financial markets and banking and real estate industries were devastated. Millions of people lost their life savings, jobs, and homes. Throughout the recession, the GDP of the United States declined by 4.3 percent, and the unemployment rate neared 10 percent, even reaching it at one point.

Due to the housing boom in the United States at the time, mortgage lenders were less restrictive with regards to the borrowers they approved for loans. As housing prices rose, financial institutions acquired these risky mortgages in hopes of gaining quick profit. Interestingly enough, the Dow Jones Industrial Average reached an all time high in 2007. However, over the roughly 18 months of the recession, it would lose over half of its value. Countless Americans who had invested large portions of their life into the stock market were catastrophically affected. The net worth of American households declined by 14 trillion dollars.

According to the Financial Crisis Inquiry Commission, this recession was avoidable. Their 2011 report identified failure on the part of the government to regulate the financial industry, including the inability to lower "toxic" mortgage lending. Also, too many financial firms were taking on far too many risks. This system failed, thus affecting the flow of credit to customers and businesses. Among other causes named in the report were lawmakers unable to understand the collapsing financial system and excessive borrowing by consumers and corporations.

Sources:
https://www.investopedia.com/terms/g/great-recession.asp
https://www.history.com/topics/21st-century/recession