The 2007 to 2010 subprime mortgage crisis grew from a housing boom built on cheap credit: the Federal Reserve cut rates to 1 percent by 2004 while foreign capital from Asia and oil exporters hunted for yield. Lenders wrote 2/28 adjustable rate mortgages with two-year teaser rates, and under the originate to distribute model brokers collected fees and sold loans to Wall Street within days. Warren Buffett told the Financial Crisis Inquiry Commission that a nationwide belief that home prices could not fall dramatically drove the behavior. Wall Street pooled loans into mortgage-backed securities and CDOs sliced into tranches, and shadow banks ran debt ratios as high as 40 to 1.

Rating agencies paid by issuers stamped senior tranches AAA, using the Gaussian copula and assuming regional housing markets were uncorrelated, then downgraded $1.9 trillion in mortgage securities in 2007 and 2008. As the Fed raised rates from 1 to 5.25 percent between 2004 and 2006 and teaser rates reset, foreclosures mounted, interbank lending froze, and credit default swaps multiplied losses, culminating in the collapse of Lehman Brothers in September 2008. TARP and the 2009 stimulus followed, and by 2021 the government had turned a $109 billion profit on the rescue funds.

• The 1999 repeal of Glass-Steagall removed the wall between commercial and investment banking.
• Michael Lewis described speculators stacking side bets on mortgage bonds they did not own.
• Nearly nine million jobs were lost in 2008 and 2009, and U.S. household net worth fell by $13 trillion.
• Homeownership among young adults dropped from 43 percent in 2005 to 37 percent by 2013.
• From 2009 to 2015 the top 1 percent captured 52 percent of U.S. income growth.