The main cause of the financial crisis of 2007-2009 was caused by which financial market factor?

Question

Quizplus · Accepted Answer

The financial crisis of 2007-2009 was caused by a combination of factors, but the main one was the agency problem. This refers to the conflict of interest that arises when one party (such as a financial institution) is expected to act in the best interest of another party (such as investors), but has an incentive to act in their own self-interest instead. In this case, banks and other financial institutions were incentivized to take on risky loans and investments, leading to an overinflated housing market and ultimately, the collapse of the financial system.

The Main Cause of the Financial Crisis of 2007-2009 Was