Large scale asset purchases and bank lending

The global financial crisis of 2007-2008 is considered by many to be the worst financial crisis since the Great Depression of the 1930s. This crisis was started by the subprime mortgage crisis in the United States housing sector. This mortgage crisis had created a steep rise in the delinquencies and foreclosures of subprime mortgages. This resulted in a massive decline of securities backed by those mortgages, which eventually resulted in the collapse of several major financial institutions and put the entire financial sector at risk. The cause of this mortgage crisis is the increase of the subprime mortgages as a percentage of the total mortgage market. This percentage grew from a historical percentage of 8 percent to 20 percent during period from 2004 to 2006. The problem was further increased, because more than 90 percent of subprime mortgages were adjustable-rate mortgages. These changes in the mortgage market led to higher risk for the mortgages and lower lending standards. This problem was further exacerbated by the fact that US households were already highly indebted. The percentage of disposable personal income to debt ratio of US households, increased from 77 percent in 1990 to 127 percent in 2007. Much of this increase was mortgage related.