ABC News reports that during this time risk analysts at Washington Mutual, one of the nation's largest banks, were told to ignore high risk loans because lending had to be maximized. Those who objected were disciplined or fired.
State attorneys-general moved to investigate mortgage fraud but were blocked from doing so by orders of the Treasury Department's Comptroller of the Currency. There was no federal agency that was charged with regulating mortgage fraud.
In February 2006, Ben Bernanke replaced Alan Greenspan as Federal Reserve Chairman and held interest rates steady. Homeowners began to default as ARMs reset.
The housing bubble began to collapse in 2006-2007, with the economy showing early signs of a recession and the stock market starting to decline by August 2007. Home prices began to plummet in most markets, with millions of homeowners owing more on their homes than their new appraisals.
Homeowners began to default, with over four million homes going to foreclosure from 2006-2008. In many cases, homeowners simply walked away, dropping off the keys to their houses at the bank.
The U.S. economy shed 60,000 jobs in August 2008. In a year, Wall Street had cut 200,000 jobs. State and local governments began to cut budgets and jobs.
The "toxic debt"- from the collapse of the housing bubble brought about a full-scale crash of the U.S. financial system by September 2008. The stock market immediately fell, with 40 percent of its value--$8 trillion--now having been lost in a year. $2 trillion of the losses were in retirement savings.
The crash of the U.S. economy began to reverberate around the world with bankers and the IMF warning of an onrushing global recession.
Massive bailouts by the U.S. Treasury Department and the Federal Reserve failed to stem the tide of the crashing markets. By late October 2008 the recession has begun to hit in force.
As the situation worsened, big banks like J.P. Morgan Chase received government capitalization even as they were buying up banks that were failing. J.P. Morgan Chase paid $1.9 billion for Washington Mutual with assets of over $300 billion.
The U.S. government joined with the nations of Europe in planning a series of economic summits to explore global financial solutions. President Bush will host the first summit in Washington, D.C., on November 15, after the U.S. presidential election.
The U.S. military shifted combat troops from Iraq to the U.S. to contain possible civil unrest.
Most major retail chains began to close stores and lay off employees even as the Christmas season approached.
The Washington Post reported on October 23, 2008: "Employers are moving to aggressively cut jobs and reduce costs in the fact of the nation's economic crisis, preparing for what many fear will be a long and painful recession."-
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