Conditions that likely contributed to a credit crunch in 2008 include:

Question

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Capital shortfalls caused by falling real estate prices were a major contributing factor to the credit crunch in 2008. As property values declined, the collateral backing many mortgage-backed securities became less valuable, leading to significant write-downs and losses for financial institutions. This, in turn, led many to reduce lending and/or hoard capital to protect against further losses.

Conditions That Likely Contributed to a Credit Crunch in 2008