What caused the Global Financial Crises?

The preconditioning for the financial crisis were complex and multi-causal.[5][6][7] Almost two decades prior, the U.S. Congress had passed legislation encouraging financing for affordable housing.[8] However, in 1999, parts of the Glass-Steagall legislation, which had been adopted in 1933, were repealed, permitting financial institutions to commingle their commercial (risk-averse) and proprietary trading (risk-taking) operations.[9] Arguably the largest contributor to the conditions necessary for financial collapse was the rapid development in predatory financial products which targeted low-income, low-information homebuyers who largely belonged to racial minorities.[10] This market development went unattended by regulators and thus caught the U.S. government by surprise.[11]

There were multiple factors that caused the financial crises.  Two decades before the crisis, the U.S Government implemented multiple new laws to help encourage financing for affordable housing.  However, in 1999, portions of the Glass-Steagall act, which was passed by congress in 1933, was repealed and as a result, created more overall risk in the financial system as it allowed institutions to commingle low risk real estate investments with riskier investment operations.  The final major factor was a large increase in predatory home loan lending practices which targeted low-income, low-credit, uninformed homebuyers (mostly racial minorities).  The severity of these factors went unnoticed by U.S financial regulators and by the time the effects surfaced, the government was caught by surprise.