Eleven Year Anniversary

Today is the anniversary of one of the earliest events marking the start of the financial crisis eleven years ago and the beginning of the Great Recession. 

Millions of American homeowners had adjustable-rate mortgages. They took lower introductory interest rates with knowledge that they would reset after a few years.  Many planned to sell their homes before then.  When home prices began to falter in 2006, they couldn't sell. Moreover, they couldn't afford the higher monthly payments from the interest rate reset and as a consequence they were facing foreclosure.  In January 2008, there were 57 percent more foreclosures than 12 months earlier. 

In response to a struggling housing market, the Federal Market Open Committee began lowering the fed funds rate. It dropped the rate to 3.5 percent on January 22, 2008, then to 3.0 percent a week later.  Economic analysts thought lower rates would be enough to restore demand for homes.  Little did they know what was in store for them.....