What happened during the 2008 financial crisis? The 2008 financial crisis also known as the great recession stock dropped by 50% leaving many investors high and dry. There were many causes of the great recession. The primary cause of the 2008 financial crisis was the subprime lending bubble that popped. Subprime lending is when banks and mortgage brokers would give loans to people with low or no credit score. Many banks did not perform really any diligence and offered these loans for homes with no income verification. Banks were fine with doing this at first because the home backed up the loan if people did not pay the mortgage but this became a problem when home prices fell and the value of the home was not enough to cover the banks losses. Additionally, banks often used adjustable rate mortgages (ARMs) what had a lower rate customers could afford at the start of the loan but increased the monthly payment after a given amount of time. This additional factor caused thousands of homeowners to become delinquent and ultimately led to many foreclosures.