Subprime crisis may be the most frequently highlighted terminology in recent pulications and  mass media. We’re familiar with the consequences of such crisis and all the financial meltdown brought about by it but nevertheless it seems that we’ve never been informed about how such subprime crisis get started.

 In order to enhance the ownership of private homes ,The Clinton and Bush administration cut back the interest rate and encourage banks to lower their loan threshold so that people with poor credit history (they can be called subprime customers) can apply for the loans and mortgage the house to the bank.With the unprecendented amout of money pouring into real estate industry, US experience a housing boom when the price of houses went up and no one is going to believe the price would fall.Lenders bundles the mortgage to securities and sold them to investors on wall street such as Lehman Bothers .

 Afterwards, the government revised the policy to raise interest rate and incured a fall in housing prices.Home owners owe to the mortgage lenders lot more than their houses are worth.When the lenders discovered home owners couldn’t keep up with loan, they seized their houses and tried to sell them. With so many houses waiting to be sold, the price suffered a slump and investors’ money evaporated.

 One thing leads to another. Banks went bankrupt and confidence was squelched down.A fiancial crisis is around the corner.