The 2007-2008 US financial crisis is considered one of the worst financial crises since the Great Depression of the 1930s. It nearly brought down large financial institutions, and stock markets fell dramatically across the world. Consumer wealth has declined by trillions of US dollars and has played a significant role in the failure of key companies and the decline of economic activities. All of these factors led to the global recession of 2007-2008 and played a major role in contributing to the European sovereign debt crisis. The easy availability of credit in the US, the Russian debt crisis and the Asian financial crisis of the late 1990s showed the way for construction boom in the US. Relaxed lending rules and rising real estate prices along with the rise of foreign funds helped generate this real estate bubble. There was an increase in real estate and credit, mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), which was due to house prices and mortgages. Investors from all over the world have invested in the US real estate market. Prices then started to fall and large financial institutions, which were the largest investors in subprime MBS, lost heavily. As a result, home prices began to decline rapidly and this caused foreclosures. The foreclosure problem began in late 2006 in the United States and has continued to drain wealth from consumers and banking institutions. It affected the other types of loans and the default on these loans increased enormously and the crisis widened and started to affect other sectors of the economy. The root cause of financial crises collectively lies with debt and mortgage-backed assets. Ever since the Great Depression, real estate prices in the US have always risen steadily... middle of the paper... in return they don't want any more CDOs on their balance sheet. This panic caused the crisis. These crises have brought the global financial system to the point of collapse. The US Federal Reserve has taken measures to expand the money supply. The United States allocated nearly $1 trillion in two stimulus packages in 2008/2009. The Federal Reserve's reaction was immediate. In the last quarter of 2008, central banks purchased $2.5 trillion in private debt and assets from banks. It was the largest injection of liquidity into the credit market, and it was the largest monetary policy action in the history of this world. The US and European governments have increased the capital of their national banking systems by $1.5 trillion by purchasing newly issued preferred shares in their major banks. Governments have also bailed out many companies by shouldering their huge financial obligations.