The downturn in the stock market was caused by the huge numbers of housing foreclosures. These were caused because the term "newly-approved" came about. It actually means not-approved, but the banks were willing to go out on a limb and offer mortgages to these people. They figured the foreclosure rate would go up maybe a little bit, but didn't expect it to go from 1% to 6%. With so many people defaulting, they had to pull what money they had in the market out to try to pay off their mortgages that were doomed from the day they originated. These peoples money started causing prices to drop, scaring more people and making them pull money. Also, the banks that had given all of the loans that were now defaulting were losing tons and tons of money causing their stocks to drop in price and eventually file for bankruptcy or hope for a bailout. At least that is my take on the whole thing. My major is tied very closely to the economy so its been a great learning period for me. I'm glad I am in school when it happened rather than happening a year after I graduate.
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