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131-530: The business was founded in 1929 as Golden West Savings and Loan Association, a small savings and loan in Oakland, California . Golden West Financial's subsidiary, World Savings, was established in Madera, California , in 1912. Golden West Savings and Loan Association was purchased in 1963 for $ 4 million by Herbert Sandler and Marion Sandler , through their newly created corporation, Golden West Financial. Some of

262-434: A run on the shadow banking system that began in mid-2007, which adversely affected the functioning of money markets. Examples of vulnerabilities in the private sector included: financial institution dependence on unstable sources of short-term funding such as repurchase agreements or Repos; deficiencies in corporate risk management; excessive use of leverage (borrowing to invest); and inappropriate usage of derivatives as

393-745: A "classic" boom-bust credit cycle was a narrowing of the difference between subprime and prime mortgage interest rates (the "subprime markup") between 2001 and 2007. In addition to considering higher-risk borrowers, lenders had offered progressively riskier loan options and borrowing incentives. In 2005, the median down payment for first-time home buyers was 2%, with 43% of those buyers making no down payment whatsoever. By comparison, China has down payment requirements that exceed 20%, with higher amounts for non-primary residences. To produce more mortgages and more securities, mortgage qualification guidelines became progressively looser. First, "stated income, verified assets" (SIVA) loans replaced proof of income with

524-457: A "statement" of it. Then, "no income, verified assets" (NIVA) loans eliminated proof of employment requirements. Borrowers needed only to show proof of money in their bank accounts. "No Income, No Assets" (NINA) or Ninja loans eliminated the need to prove, or even to state any owned assets. All that was required for a mortgage was a credit score. Types of mortgages became more risky as well. The interest-only adjustable-rate mortgage (ARM) allowed

655-414: A "willful disregard" for a borrower's ability to pay. Nearly 25% of all mortgages made in the first half of 2005 were "interest-only" loans. During the same year, 68% of "option ARM" loans originated by Countrywide Financial and Washington Mutual had low- or no-documentation requirements. At least one study has suggested that the decline in standards was driven by a shift of mortgage securitization from

786-407: A 'lease' which turned out to be a mortgage against the 19,000-acre rancho. The lands became Carpentier's when Peralta refused to repay the loan he believed was fraudulently incurred. The Peraltas had no choice but to abandon the homesite they had occupied for two generations." In 1851, three men— Horace Carpentier , Edson Adams, and Andrew Moon—began developing what is now downtown Oakland. In 1852,

917-453: A balance, up from 6% in 1970. Free cash used by consumers from home equity extraction doubled from $ 627 billion in 2001 to $ 1,428 billion in 2005 as the housing bubble built, a total of nearly $ 5 trillion over the period. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $ 10.5 (~$ 14.6 trillion in 2023) trillion. From 2001 to 2007, U.S. mortgage debt almost doubled, and

1048-424: A building boom and eventually to a surplus of unsold homes, which caused U.S. housing prices to peak and begin declining in mid-2006. Easy credit, and a belief that house prices would continue to appreciate, had encouraged many subprime borrowers to obtain adjustable-rate mortgages . These mortgages enticed borrowers with a below market interest rate for some predetermined period, followed by market interest rates for

1179-736: A disproportionate death toll from the COVID-19 pandemic and Delta cron hybrid variant within the San Francisco Bay Area. In 2023, prior to and during the Covid pandemic, Oakland became the first city in American history to lose three professional major league sports teams to other cities within a span of five years. Oakland is in the eastern region of the San Francisco Bay . The United States Census Bureau says

1310-819: A long-term trend of rising housing prices had encouraged borrowers to assume risky mortgages in the anticipation that they would be able to quickly refinance at easier terms. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts of the U.S., borrowers were unable to refinance. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices fell, and adjustable-rate mortgage (ARM) interest rates reset higher. As housing prices fell, global investor demand for mortgage-related securities evaporated. This became apparent by July 2007, when investment bank Bear Stearns announced that two of its hedge funds had imploded. These funds had invested in securities that derived their value from mortgages. When

1441-501: A marsh-lined wildlife haven, Lake Merritt was dredged and bordered with parks from the 1890s to the 1910s. Despite this reduction in habitat, Oakland is home to a number of rare and endangered species, many of which are localized to serpentine soils and bedrock. Lake Merritt is surrounded by residential and business districts, including downtown and Grand Lake . The city of Piedmont , incorporated in Oakland's central foothills after

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1572-597: A new plant there, Oakland had become known as the " Detroit of the West," referring to the major auto manufacturing center in Michigan. Oakland expanded during the 1920s, as its population expanded with factory workers. Approximately 13,000 homes were built in the 3 years between 1921 and 1924, more than during the 13 years between 1907 and 1920. Many of the large downtown office buildings, apartment buildings, and single-family houses still standing in Oakland were built during

1703-423: A number of years. Causes proposed include the inability of homeowners to make their mortgage payments (due primarily to adjustable-rate mortgages resetting, borrowers overextending, predatory lending , and speculation), overbuilding during the boom period, risky mortgage products, increased power of mortgage originators, high personal and corporate debt levels, financial products that distributed and perhaps concealed

1834-533: A number that is believed to have risen to 12 million by November 2008. By September 2010, 23% of all U.S. homes were worth less than the mortgage loan. Borrowers in this situation have an incentive to default on their mortgages as a mortgage is typically nonrecourse debt secured against the property. Economist Stan Leibowitz argued in the Wall Street Journal that although only 12% of homes had negative equity, they comprised 47% of foreclosures during

1965-693: A prolific agricultural region. In the 1850s, what became the first campus of the University of California was founded in Oakland, and Oakland was selected as the western terminal of the Transcontinental Railroad in 1869. The following year, Oakland's Lake Merritt became the United States' first officially designated wildlife refuge, now a National Historic Landmark . Following the catastrophic 1906 San Francisco earthquake , many San Francisco citizens moved to Oakland, enlarging

2096-413: A rapid growth in the industry, and Golden West profited from it by careful examination of the market as it fluctuated and not over-extending its reach during the savings and loan crisis . Golden West continued to expand its portfolio, and remained marginally profitable for its investors. Marion and Herbert Sandler continued to serve as co- CEOs , with Marion overseeing the operations and Herbert working on

2227-402: A record level of nearly 40% of homes purchased were not intended as primary residences. David Lereah, National Association of Realtors 's chief economist at the time, stated that the 2006 decline in investment buying was expected: "Speculators left the market in 2006, which caused investment sales to fall much faster than the primary market." Housing prices nearly doubled between 2000 and 2006,

2358-678: A series of measures to stabilize the financial system, including the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA). The collapse of the United States housing bubble and high interest rates led to unprecedented numbers of borrowers missing mortgage repayments and becoming delinquent. This ultimately led to mass foreclosures and the devaluation of housing-related securities . The housing bubble preceding

2489-503: A small epidemic of Pneumonic plague which killed a dozen people in Oakland. This started when a man went hunting in Contra Costa Valley and killed a squirrel. After eating the squirrel, he fell ill four days later and another household member contracted the plague. This in turn was passed on either directly or indirectly to about a dozen others. The officials in Oakland acted quickly by issuing death certificates to monitor

2620-575: A span of five years. The earliest known inhabitants of the area were the Huchiun natives, who lived there for thousands of years. The Huchiun belonged to a linguistic grouping later called the Ohlone (a Miwok word meaning "western people"). In Oakland, they were concentrated around Lake Merritt and Temescal Creek , a stream that enters the San Francisco Bay at Emeryville . In 1772,

2751-466: A step which the company had been resisting for years: it began to write loans at an annual interest rate of just 1%, with correspondingly low monthly payments. World Savings previously did not allow rates so low. The steep losses generated by these Golden West/World Savings loans ended up crippling Wachovia, resulting in its eventual purchase by Wells Fargo in 2008. While World Savings continued to scrutinize borrowers' ability to manage increased payments,

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2882-404: A sweet spot right now in the mortgage business, and that is driving extraordinary earnings compared to other thrifts. They are the best ARM lender, and they have superior interest rate management". As with the late 1980s and early 1990s, Golden West continued to expand assets and lending opportunities during the market decline after a burst of refinancing . In 2006, Golden West Financial was named

3013-438: A tightly controlled duopoly to a competitive market in which mortgage originators held the most sway. The worst mortgage vintage years coincided with the periods during which Government Sponsored Enterprises (specifically Fannie Mae and Freddie Mac) were at their weakest, and mortgage originators and private label securitizers were at their strongest. In a Peabody Award -winning program, NPR correspondents considered why there

3144-454: A tool for taking excessive risks. Examples of vulnerabilities in the public sector included: statutory gaps and conflicts between regulators; ineffective use of regulatory authority; and ineffective crisis management capabilities. Bernanke also discussed " Too big to fail " institutions, monetary policy, and trade deficits. During May 2010, Warren Buffett and Paul Volcker separately described questionable assumptions or judgments underlying

3275-573: A total of US$ 57 million during the 2001–2011 timeframe to plaintiffs claiming police abuse; this is the largest sum paid by any city in California. On October 10, 2011, protesters and civic activists began " Occupy Oakland " demonstrations at Frank Ogawa Plaza in Downtown Oakland . African-Americans dropped to 28% of Oakland's population in 2010, from nearly half in 1980, due to fast-rising rents and an extreme housing crisis in

3406-462: A vacant three-bedroom house in West Oakland. The group, calling themselves Moms 4 Housing , said their goal was to protest what they said was a large number of vacant houses in Oakland owned by redevelopment companies while the city experienced a housing crisis. Two months later they were evicted from the house by three dozen sheriff's deputies, as hundreds of supporters demonstrated in favor of

3537-672: A vastly different trend from the historical appreciation at roughly the rate of inflation. While homes had not traditionally been treated as investments subject to speculation, this behavior changed during the housing boom. Media widely reported condominiums being purchased while under construction, then being "flipped" (sold) for a profit without the seller ever having lived in them. Some mortgage companies identified risks inherent in this activity as early as 2005, after identifying investors assuming highly leveraged positions in multiple properties. One 2017 NBER study argued that real estate investors (i.e., those owning 2+ homes) were more to blame for

3668-494: A year or two of appreciation. As a result of the depreciating housing prices, borrowers' ability to refinance became more difficult. Borrowers who found themselves unable to escape higher monthly payments by refinancing began to default. As more borrowers stopped making their mortgage payments, foreclosures and the supply of homes for sale increased. This placed downward pressure on housing prices, which further lowered homeowners' equity . The decline in mortgage payments also reduced

3799-481: Is down from 83,000 the prior September but well above the 2000–2006 average of 21,000 completed foreclosures per month. Speculative borrowing in residential real estate has been cited as a contributing factor to the subprime mortgage crisis. During 2006, 22% of homes purchased (1.65 million units) were for investment purposes, with an additional 14% (1.07 million units) purchased as vacation homes. During 2005, these figures were 28% and 12%, respectively. In other words,

3930-411: Is far enough inland that the fog often burns off by midday, allowing it to have typically sunny California days. The hills tend to have more fog than the flatlands, as the fog drifts down from Berkeley . The U.S. Weather Bureau kept weather records in downtown Oakland from October 4, 1894, to July 31, 1958. During that time, the record high temperature was 104 °F (40 °C) on June 24, 1957, and

4061-653: Is the most populous city in the East Bay, the third most populous city in the Bay Area, and the eighth most populous city in California. It serves as the Bay Area's trade center: the Port of Oakland is the busiest port in Northern California , and the fifth- or sixth-busiest in the United States. A charter city , Oakland was incorporated on May 4, 1852, in the wake of the state's increasing population due to

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4192-417: Is the only beach in Oakland. Oaklanders refer to their city's terrain as "the flatlands" and "the hills" . Until recent waves of gentrification, these terms also symbolized Oakland's deep economic divide, with "the hills" being more affluent communities. About two-thirds of Oakland lies in the flat plain of the East Bay, with one-third rising into the foothills and hills of the East Bay range. Ruptures along

4323-495: Is typified by the temperate and seasonal Mediterranean climate. Summers are usually dry and warm and winters are cool and damp. It has features found in both nearby coastal cities such as San Francisco and inland cities such as San Jose , making it warmer than San Francisco and cooler than San Jose. Its position on San Francisco Bay across from the Bay Bridge means the northern part of the city can have cooling maritime fog . It

4454-518: The Black Panther Party at Merritt College (then located at a former high school on Grove Street, now occupied by Children's Hospital Oakland Research Institute ), which emphasized Black nationalism , advocated armed self-defense against police, and was involved in several incidents that ended in the deaths of police officers and other Black Panther members. Among their social programs were feeding children and providing other services to

4585-530: The California gold rush . Oakland's territory covers what was once a mosaic of California coastal terrace prairie , oak woodland , and north coastal scrub . In the late 18th century, it became part of a large rancho grant in the colony of New Spain , and was known for its plentiful oak tree stands. Its land served as a resource when its hillside oak and redwood timber were logged to build San Francisco . The fertile flatland soils helped it become

4716-639: The College of California , and in 1869, the first campus of the University of California . The university moved just north to Berkeley in the 1870s. During the 1850s, just as gold was discovered in California, Oakland started growing and further developing because land was becoming too expensive in San Francisco . People in China were struggling financially as a result of the First Opium War ,

4847-480: The Jim Crow South carried their racial attitudes, causing tensions to rise among black and white workers competing for better-paying jobs in the Bay Area. The racial harmony Oakland African-Americans had been accustomed to prior to the war evaporated. Also migrating to the area during this time were many Mexican Americans from southwestern states such as New Mexico , Texas , and Colorado . Many worked for

4978-642: The Oakland Hills . East Oakland, which includes the East Oakland Hills, encompasses more than half of Oakland's land area, stretching from Lakeshore Avenue on the east shore of Lake Merritt southeast to the San Leandro border. North Oakland encompasses the neighborhoods between downtown and Berkeley and Emeryville . West Oakland is the area between downtown and the Bay, partially surrounded by

5109-470: The Oakland Museum (established 1970). Subprime mortgage crisis The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis . The crisis led to a severe economic recession , with millions losing their jobs and many businesses going bankrupt . The U.S. government intervened with

5240-566: The Oakland Point , and encompassing the Port of Oakland . In 2011, Oakland was ranked the tenth most walkable city in the United States by Walk Score . Lake Merritt, an urban estuary near downtown, is a mix of fresh and salt water draining in and out from the Oakland Harbor at the San Francisco Bay and one of Oakland's most notable features. It was designated the United States' first official wildlife refuge in 1870. Originally

5371-664: The San Francisco–Oakland Bay Bridge also sustained damage and was closed to traffic for one month. On October 20, 1991, a massive firestorm swept down from the Berkeley /Oakland hills above the Caldecott Tunnel. Twenty-five people were killed, 150 people were injured, and nearly 4,000 homes destroyed. With the loss of life and an estimated economic loss of US$ 1.5 billion, this was the worst urban firestorm in American history, until 2017. During

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5502-592: The Second Opium War , and the Taiping Rebellion , so they began migrating to Oakland, many of whom were recruited to work on railroads. However, the Chinese struggled to settle because they were discriminated against by the white community and their living quarters were burned down on several occasions. The city and its environs quickly grew with the railroads, becoming a major rail terminal in

5633-549: The Southern Pacific Railroad , at its major rail yard in West Oakland. Their young men encountered hostility and discrimination by Armed Forces personnel, and tensions broke out in " zoot suit riots " in downtown Oakland in 1943 in the wake of a major disturbance in Los Angeles that year. In 1946, National City Lines (NCL), a General Motors holding company , acquired 64% of Key System stock; during

5764-502: The commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions, assuming significant additional financial commitments. The risks to the broader economy created by the housing market downturn and subsequent financial market crisis were primary factors in several decisions by central banks around the world to cut interest rates and governments to implement economic stimulus packages. Effects on global stock markets due to

5895-470: The shadow banking system . These entities were not subject to the same regulations as depository banking. Further, shadow banks were able to mask the extent of their risk taking from investors and regulators through the use of complex, off-balance sheet derivatives and securitizations. Economist Gary Gorton has referred to the 2007–2008 aspects of the crisis as a " run " on the shadow banking system. The complexity of these off-balance sheet arrangements and

6026-752: The "Most Admired Company" in the mortgage services business by Fortune magazine. By the time Wachovia announced its acquisition in 2006, Golden West Financial had over $ 125 billion in assets and 11,600 employees. The Sandlers, who had run the company for forty-three years, were ready to retire and focus on philanthropy. In 2006, they agreed to acquisition of Golden West Financial and its thrift, World Savings, by Wachovia Bank , The acquisition gave Wachovia an additional 285-branch network spanning 10 states. Wachovia greatly raised its profile in California, where Golden West held $ 32 billion in deposits and operated 123 branches. Wachovia also picked up about $ 122 billion in option adjustable rate mortgages. The acquisition

6157-484: The 1890s. The various streetcar companies operating in Oakland were acquired by Francis "Borax" Smith and consolidated into what eventually became known as the Key System , the predecessor of today's publicly owned AC Transit . Oakland was one of the worst affected cities in California that was impacted by the San Francisco plague of 1900–1904 . Quarantine measures were set in place at the Oakland ports requiring

6288-490: The 1906 earthquake, is a small independent city surrounded by the city of Oakland. Oakland has a warm-summer Mediterranean climate ( Köppen Csb ) with an average of 260 sunny days per year. In general, the city features warm, dry summers, and cool, wet winters. Based on data gathered by the National Oceanic and Atmospheric Administration , Oakland is ranked No. 1 in climate among U.S. cities. Oakland's climate

6419-427: The 1920s; they reflect the architectural styles of the time. Russell Clifford Durant established Durant Field at 82nd Avenue and East 14th Street in 1916. The first transcontinental airmail flight finished its journey at Durant Field on August 9, 1920, flown by Army Capt. Eddie Rickenbacker and Navy Lt. Bert Acosta . Durant Field was often called Oakland Airport, though the current Oakland International Airport

6550-477: The 1950s California Supreme Court lawsuit Vallerga v. Dept. Alcoholic Bev. Control, when the bar challenged a state law for the right to serve gay patrons and won in 1959. In 1960, Kaiser Corporation opened its new headquarters; it was the largest skyscraper in Oakland, as well as "the largest office tower west of Chicago " up to that time. In the postwar period, suburban development increased around Oakland, and wealthier residents moved to new housing . Despite

6681-521: The 1970s led the Sandlers to acquire World Savings in 1975. World Savings had been growing with other mergers in Colorado, so this acquisition expanded Golden West Financial out of California and 107 offices. The corporation began operating all of its savings and loans offices under the name World Savings. Lessening restrictions on savings and loans by the United States government in the early 1980s saw

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6812-553: The 25.9% drop between 1928 and 1933 when the Great Depression occurred. From September 2008 to September 2012, there were approximately 4 million completed foreclosures in the U.S. As of September 2012, approximately 1.4 million homes, or 3.3% of all homes with a mortgage, were in some stage of foreclosure compared to 1.5 million, or 3.5%, in September 2011. During September 2012, 57,000 homes completed foreclosure; this

6943-601: The Deep South: Alabama, Arkansas, Georgia, Louisiana, Mississippi, South Carolina, and Texas, as well as Missouri and Tennessee. Henry J. Kaiser 's representatives recruited sharecroppers and tenant farmers from rural areas to work in his shipyards. African Americans were part of the Great Migration by which five million persons left the South, mostly for the West, from 1940 to 1970. White migrants from

7074-806: The Fruitvale District, and included the Josiah Lusk Canning Company, the Oakland Preserving Company (which started the Del Monte brand), and the California Packing Company. President Franklin D. Roosevelt called on defense industries with government contracts to integrate their workforces and provide opportunities for all Americans. Tens of thousands of laborers came from around the country, especially poor whites and blacks from

7205-571: The State Board of Health and the United States Public Health Service were only allotted about $ 60,000 a year to eradicate the disease. During this period Oakland did not have sufficient health facilities, so some of the infected patients were treated at home. The State Board of Health along with Oakland also advised physicians to promptly report any cases of infected patients. Yet, in 1919 it still resulted in

7336-538: The Town of Oakland was incorporated by the state legislature. During this time, Oakland had 75–100 inhabitants, two hotels, a wharf, two warehouses, and only cattle trails. Two years later, on March 25, 1854, Oakland re-incorporated as the City of Oakland. Horace Carpentier was elected the first mayor, though a scandal ended his mayorship in less than a year. In 1853, a preparatory academy was founded in Oakland that soon became

7467-468: The U.S. and European economies. The U.S. entered a deep recession, with nearly 9 million jobs lost during 2008 and 2009, roughly 6% of the workforce. The number of jobs did not return to the December 2007 pre-crisis peak until May 2014. U.S. household net worth declined by nearly $ 13 trillion (20%) from its Q2 2007 pre-crisis peak, recovering by Q4 2012. U.S. housing prices fell nearly 30% on average and

7598-443: The U.S. financial and economic system that contributed to the crisis. These assumptions included: 1) Housing prices would not fall dramatically; 2) Free and open financial markets supported by sophisticated financial engineering would most effectively support market efficiency and stability, directing funds to the most profitable and productive uses; 3) Concepts embedded in mathematics and physics could be directly adapted to markets, in

7729-486: The U.S. stock market fell approximately 50% by early 2009, with stocks regaining their December 2007 level during September 2012. One estimate of lost output and income from the crisis comes to "at least 40% of 2007 gross domestic product ". Europe also continued to struggle with its own economic crisis , with elevated unemployment and severe banking impairments estimated at €940 billion between 2008 and 2012. As of January 2018, U.S. bailout funds had been fully recovered by

7860-440: The amount of mortgage debt per household rose more than 63%, from $ 91,500 to $ 149,500, with essentially stagnant wages. Economist Tyler Cowen explained that the economy was highly dependent on this home equity extraction: "In the 1993–1997 period, home owners extracted an amount of equity from their homes equivalent to 2.3% to 3.8% GDP. By 2005, this figure had increased to 11.5% GDP." This credit and house price explosion led to

7991-577: The area defined as the Central Business District in Oakland's 1998 General Plan. Brown's plan and other redevelopment projects were controversial due to potential rent increases and gentrification , which would displace lower-income residents from downtown Oakland into outlying neighborhoods and cities. Due to allegations of misconduct by the Oakland Police Department , the City of Oakland has paid claims for

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8122-488: The area that later became Oakland was colonized, along with the rest of California, by Spanish settlers for the king of Spain . In the early 19th century, the Spanish crown granted the East Bay area to Luis María Peralta for his Rancho San Antonio . The grant was confirmed by the successor Mexican republic upon its independence from Spain. Upon his death in 1842, Peralta divided his land among his four sons. Most of Oakland

8253-403: The authorities at the port to inspect the arriving vessels for the presence of infected rats. Quarantine authorities at these ports inspected over a thousand vessels per year for plague and yellow fever. By 1908, over 5,000 people were detained in quarantine. Hunters were sent to poison the affected areas in Oakland and shoot the squirrels, but the eradication work was limited in its range because

8384-411: The automobile industry went through restructuring, many jobs were lost. In addition, labor unrest increased as workers struggled to protect their livelihoods. Oakland was the center of a general strike during the first week of December 1946, one of six cities across the country that had such a strike after World War II. The Mary's First and Last Chance in Oakland was a lesbian bar, once the focus of

8515-819: The bay. On November 27, 1908, Homer took a ferry across the bay in a driving rainstorm and met for lunch with Frank and twenty three other businessmen at the Hotel Metropole at 13th and Jefferson. This gathering became the first meeting of the Tri-City Rotary Club, renamed in 1911 The Rotary Club of Oakland, the third Rotary Club in the world. This group established the tradition of weekly meetings, something most clubs worldwide follow today. In 1917, General Motors opened an automobile factory in East Oakland called Oakland Assembly . It produced Chevrolet cars and then GMC trucks until 1963, when it

8646-738: The boom period. The use of automated loan approvals allowed loans to be made without appropriate review and documentation. In 2007, 40% of all subprime loans resulted from automated underwriting. The chairman of the Mortgage Bankers Association claimed that mortgage brokers, while profiting from the home loan boom, did not do enough to examine whether borrowers could repay. Mortgage fraud by lenders and borrowers increased enormously. The Financial Crisis Inquiry Commission reported in January 2011 that many mortgage lenders took eager borrowers' qualifications on faith, often with

8777-403: The bubble (and declines in the bust) were most pronounced. In these states, investor delinquency rose from around 15% in 2000 to over 35% in 2007 and 2008. Economist Robert Shiller argued that speculative bubbles are fueled by "contagious optimism, seemingly impervious to facts, that often takes hold when prices are rising. Bubbles are primarily social phenomena; until we understand and address

8908-412: The bubble. Further, this greater share of income flowing to the top increased the political power of business interests, who used that power to deregulate or limit regulation of the shadow banking system. According to Robert J. Shiller and other economists, housing price increases beyond the general inflation rate are not sustainable in the long term. From the end of World War II to the beginning of

9039-427: The capital for the acquisition came from bank loans, with the balance coming from Marion's family money. Marion Sandler, a former Wall Street analyst, and Herbert, a real estate attorney, would operate the company in tandem. In 1968, the Sandlers took Golden West Financial public. In 1969, Modesto Savings was acquired and became part of Golden West Savings. The expanding popularity of savings and loan corporations in

9170-483: The city's total area is 78.0 square miles (202 km ), including 55.8 square miles (145 km ) of land and 22.2 square miles (57 km ) (28.48 percent) of water. Oakland's highest point is near Grizzly Peak Blvd, east of Berkeley, just over 1,760 feet (540 m) above sea level at about 37°52′43″N 122°13′27″W  /  37.8786°N 122.2241°W  / 37.8786; -122.2241 . Oakland has 19 miles (31 km) of shoreline, but Radio Beach

9301-437: The crisis expanded from the housing market to other parts of the economy. Total losses were estimated in the trillions of U.S. dollars globally. While the housing and credit bubbles were growing, a series of factors caused the financial system to become increasingly fragile. Policymakers did not recognize the increasingly important role played by financial institutions such as investment banks and hedge funds , also known as

9432-566: The crisis first became more visible during 2007, several major financial institutions collapsed in late 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession. Most notably, Lehman Brothers , a major mortgage lender, declared bankruptcy in September 2008 . There were many causes of the crisis, with commentators assigning different levels of blame to financial institutions, regulators, credit agencies, government housing policies, and consumers, among others. Two proximate causes were

9563-450: The crisis than subprime borrowers: "The rise in mortgage defaults during the crisis was concentrated in the middle of the credit score distribution, and mostly attributable to real estate investors" and that "credit growth between 2001 and 2007 was concentrated in the prime segment, and debt to high-risk [subprime] borrowers was virtually constant for all debt categories during this period." The authors argued that this investor-driven narrative

9694-400: The crisis was financed with mortgage-backed securities (MBSes) and collateralized debt obligations (CDOs), which initially offered higher interest rates (i.e. better returns) than government securities, along with attractive risk ratings from rating agencies . Despite being highly rated, most of these financial instruments were made up of high-risk subprime mortgages . While elements of

9825-405: The crisis were dramatic. Between January 1 and October 11, 2008, owners of stocks in U.S. corporations suffered about $ 8 trillion in losses, as their holdings declined in value from $ 20 trillion to $ 12 trillion. Losses in other countries averaged about 40%. Losses in the stock markets and housing value declines place further downward pressure on consumer spending, a key economic engine. Leaders of

9956-501: The crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels." There are several "narratives" attempting to place the causes of the crisis into context, with overlapping elements. Five such narratives include: Underlying narratives #1-3 is a hypothesis that growing income inequality and wage stagnation encouraged families to increase their household debt to maintain their desired living standard, fueling

10087-665: The east (up to 30 inches [760 mm]), with nearly all precipitation falling between November and April. Overnight lows are mild. Oakland seldom experiences warm nights with the warmest recorded night of 72 °F (22 °C) in September 1971 and an average of 64 °F (18 °C) for the annual warmest low. The coldest day of the year averages a mild 50 °F (10 °C) and has never been recorded below 36 °F (2 °C). The National Weather Service today has two official weather stations in Oakland: Oakland International Airport and

10218-519: The finance industry's opaque faulty risk pricing methodology. Among the important catalysts of the subprime crisis were the influx of money from the private sector, the banks entering into the mortgage bond market, government policies aimed at expanding homeownership, speculation by many home buyers, and the predatory lending practices of the mortgage lenders, specifically the adjustable-rate mortgage, 2–28 loan , that mortgage lenders sold directly or indirectly via mortgage brokers. On Wall Street and in

10349-596: The financial industry, moral hazard lay at the core of many of the causes. In its "Declaration of the Summit on Financial Markets and the World Economy," dated November 15, 2008, leaders of the Group of 20 cited the following causes: During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of

10480-875: The form of various financial models used to evaluate credit risk; 4) Economic imbalances, such as large trade deficits and low savings rates indicative of over-consumption, were sustainable; and 5) Stronger regulation of the shadow banking system and derivatives markets was not needed. Economists surveyed by the University of Chicago during 2017 rated the factors that caused the crisis in order of importance: 1) Flawed financial sector regulation and supervision; 2) Underestimating risks in financial engineering (e.g., CDOs); 3) Mortgage fraud and bad incentives; 4) Short-term funding decisions and corresponding runs in those markets (e.g., repo); and 5) Credit rating agency failures. The U.S. Financial Crisis Inquiry Commission reported its findings in January 2011. It concluded that "the crisis

10611-562: The government, when interest on loans is taken into consideration. A total of $ 626B was invested, loaned, or granted due to various bailout measures, while $ 390B had been returned to the Treasury. The Treasury had earned another $ 323B in interest on bailout loans, resulting in an $ 109B profit as of January 2021. The immediate cause of the crisis was the bursting of the United States housing bubble which peaked in approximately 2006. An increase in loan incentives such as easy initial terms and

10742-500: The homeowner to pay only the interest (not principal) of the mortgage during an initial "teaser" period. Even looser was the "payment option" loan, in which the homeowner has the option to make monthly payments that do not even cover the interest for the first two- or three-year initial period of the loan. Nearly one in 10 mortgage borrowers in 2005 and 2006 took out these "option ARM" loans, and an estimated one-third of ARMs originated between 2004 and 2006 had "teaser" rates below 4%. After

10873-572: The housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS), which derive their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the U.S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in MBS reported significant losses. Defaults and losses on other loan types also increased significantly as

11004-463: The housing bubble in 1997, housing prices in the US remained relatively stable. The bubble was characterized by higher rates of household debt and lower savings rates, slightly higher rates of home ownership, and of course higher housing prices. It was fueled by low interest rates and large inflows of foreign funds that created easy credit conditions. Between 1997 and 2006 (the peak of the housing bubble),

11135-596: The incorporation of California into the United States after the Mexican–American War . Camarillo claims the family was the victim of targeted racial violence . He writes in Chicanos in California , "They lost everything when squatters cut down their fruit trees, killed their cattle, destroyed their buildings, and even fenced off the roads leading to the rancho. Especially insidious were the actions of attorney Horace Carpentier , who tricked Vicente Peralta into signing

11266-505: The initial period, monthly payments might double or even triple. The proportion of subprime ARM loans made to people with credit scores high enough to qualify for conventional mortgages with better terms increased from 41% in 2000 to 61% by 2006. In addition, mortgage brokers in some cases received incentives from lenders to offer subprime ARMs even to those with credit ratings that merited a conforming (i.e., non-subprime) loan. Mortgage underwriting standards declined precipitously during

11397-658: The larger developed and emerging nations met in November 2008 and March 2009 to formulate strategies for addressing the crisis. A variety of solutions have been proposed by government officials, central bankers, economists, and business executives. In the U.S., the Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law in July 2010 to address some of the causes of the crisis. The crisis can be attributed to several factors, which emerged over

11528-537: The late 1860s and 1870s. In 1868, the Central Pacific constructed the Oakland Long Wharf at Oakland Point, the site of today's Port of Oakland . A number of horsecar and cable car lines were constructed in Oakland during the latter half of the 19th century. The first electric streetcar set out from Oakland to Berkeley in 1891, and other lines were converted and added over the course of

11659-527: The lending practices side. In 1990, The New York Times called the company "the Nation's Best-Run S.& L." saying that "the core of their business is decidedly—some might say refreshingly—old-fashioned". As the mortgage market revived in the mid-1990s, Golden West Financial Corporation expanded its reach to the east coast of the United States as struggling savings and loan associations were put up for sale. By 1995, Golden West held $ 31 billion in assets, making it

11790-516: The loans described above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses. The losses experienced by financial institutions on their mortgage-related securities impacted their ability to lend, slowing economic activity. Interbank lending dried-up initially and then loans to non-financial firms were affected. Concerns regarding the stability of key financial institutions drove central banks to take action to provide funds to encourage lending and to restore faith in

11921-421: The major increases in the number and proportion of African Americans in the city, in 1966 only 16 of the city's 661 police officers were black. Tensions between the black community and the largely white police force were high, as expectations during the civil rights era increased to gain social justice and equality before the law. Police abuse of blacks was common. Students Huey Newton and Bobby Seale founded

12052-535: The mid-1990s, Oakland's economy began to recover as it transitioned to new types of jobs. In addition, the city participated in large development and urban renewal projects, concentrated especially in the downtown area, at the Port of Oakland , and at the Oakland International Airport . After his 1999 inauguration, Oakland Mayor Jerry Brown continued his predecessor Elihu Harris' public policy of supporting downtown housing development in

12183-409: The move to rock-bottom rates lured customers whose financial reliability was harder to verify. Wachovia CEO G. Kennedy "Ken" Thompson described Golden West as a "crown jewel". But investors did not react positively to the deal. After the takeover was completed in 2006, some analysts said that Wachovia purchased Golden West at the peak of the US housing boom, and that its mortgage-related problems were

12314-564: The nearby San Andreas Fault caused severe earth movement in the San Francisco Bay Area in 1906 and 1989. San Andreas quakes induces creep (movement occurring on earthquake faults) in the Hayward fault, which runs directly through Oakland, Berkeley, San Jose and other Bay Area cities. Oakland has more than 50 distinct neighborhoods. The city's greater divisions include downtown Oakland and its greater Central Business District , Lake Merritt , East Oakland , North Oakland , West Oakland , and

12445-403: The nearby town of Alameda being made an island. In 1906, the city's population doubled with refugees made homeless after the 1906 San Francisco earthquake and fire. In 1908, the lawyer, former miner, and newspaper owner Homer Wood (1880–1976) suggested to his friend Frank Bilger of Blake and Bilger Rock Quarry and Paving Company that he organize a gathering to establish a Rotary Club east of

12576-416: The needy. As in many other American cities during the 1980s, crack cocaine became a serious problem in Oakland. Drug dealing in general, and the dealing of crack cocaine in particular, resulted in elevated rates of violent crime, causing Oakland to consistently be listed as one of America's most crime-ridden cities. In 1980, Oakland's Black population reached its 20th-century peak at approximately 47% of

12707-499: The next several years NCL engaged in the conspiratorial dissolution of Oakland's electric streetcar system. The city's expensive electric streetcar fleet was converted to cheaper diesel buses. The state Legislature created the Alameda and Contra Costa Transit District in 1955, which operates today as AC Transit , the third-largest bus-only transit system in the nation. After the war, as Oakland's shipbuilding industry declined and

12838-460: The overall city population. The 6.9 M w Loma Prieta earthquake occurred on October 17, 1989. The rupture was related to the San Andreas fault system and affected the entire San Francisco Bay Area with a maximum Mercalli intensity of IX ( Violent ). Many structures in Oakland were badly damaged including the double-decker portion of Interstate 880 that collapsed. The eastern span of

12969-418: The population, increasing its housing stock, and improving its infrastructure. It continued to grow in the 20th century with its port, shipyards , and manufacturing industry. In the 21st century, between 2019 and 2023, after the city and county refused requests for hundreds of millions of dollars in benefits to the privately owned teams, Oakland lost three teams of the major North American sports leagues within

13100-446: The price of the typical American house increased by 124%. Many research articles confirmed the timeline of the U.S. housing bubble (emerged in 2002 and collapsed in 2006–2007) before the collapse of the subprime mortgage industry. From 1980 to 2001, the ratio of median home prices to median household income (a measure of ability to buy a house) fluctuated from 2.9 to 3.1. In 2004 it rose to 4.0, and by 2006 it hit 4.6. The housing bubble

13231-411: The private banking system. With diligence, Herbert Sandler devised an adjustable-rate mortgage system for Golden West's holdings to provide as alternative to the other options available. The system and implementation was enormously successful. In 2000, the bank was one of the highest-rated stocks in the industry. Golden West was mentioned industry-wide in a positive light, once described as "They are in

13362-550: The psychology that fuels them, they're going to keep forming." Keynesian economist Hyman Minsky described how speculative borrowing contributed to rising debt and an eventual collapse of asset values. Warren Buffett testified to the Financial Crisis Inquiry Commission : "There was the greatest bubble I've ever seen in my life...The entire American public eventually was caught up in a belief that housing prices could not fall dramatically." In

13493-521: The record low temperature was 24 °F (−4 °C) on January 23, 1949. Dry, warm offshore "Diablo" winds (similar to the Santa Ana winds of Southern California) sometimes occur, especially in fall, and raise the fire danger. In 1991, such an episode allowed the catastrophic Oakland Hills fire to spread and consume many homes. Oakland, like much of Northern California, is susceptible to winter rainstorms and Atmospheric rivers . The wettest "rain year"

13624-615: The region. The city inspected warehouses and live/work spaces after a fire broke out in the Ghost Ship warehouse , killing 36 people in 2016. Oakland is the second U.S. city, after Denver , to decriminalize psilocybin mushrooms . In June 2019, the City Council passed the resolution in a unanimous vote ending the investigation and imposition of criminal penalties for use and possession of natural entheogens . In November 2019, two homeless mothers and their children moved into

13755-465: The remainder of the mortgage's term. The US home ownership rate increased from 64% in 1994 (about where it had been since 1980) to an all-time high of 69.2% in 2004. Subprime lending was a major contributor to this increase in home ownership rates and in the overall demand for housing, which drove prices higher. Borrowers who would not be able to make the higher payments once the initial grace period ended, were planning to refinance their mortgages after

13886-439: The rise in subprime lending and the increase in housing speculation. Investors, even those with "prime", or low-risk, credit ratings, were much more likely to default than non-investors when prices fell. These changes were part of a broader trend of lowered lending standards and higher-risk mortgage products, which contributed to U.S. households becoming increasingly indebted. The crisis had severe, long-lasting consequences for

14017-629: The risk of mortgage default, monetary and housing policies that encouraged risk-taking and more debt, international trade imbalances , and inappropriate government regulation. Excessive consumer housing debt was in turn caused by the mortgage-backed security , credit default swap , and collateralized debt obligation sub-sectors of the finance industry , which were offering irrationally low interest rates and irrationally high levels of approval to subprime mortgage consumers due in part to faulty financial models. Debt consumers were acting in their rational self-interest, because they were unable to audit

14148-487: The risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account

14279-409: The second half of 2008. He concluded that the extent of equity in the home was the key factor in foreclosure, rather than the type of loan, credit worthiness of the borrower, or ability to pay. Increasing foreclosure rates increases the inventory of houses offered for sale. The number of new homes sold in 2007 was 26.4% less than in the preceding year. By January 2008, the inventory of unsold new homes

14410-520: The securities held, as well as the interconnection between larger financial institutions, made it virtually impossible to re-organize them via bankruptcy, which contributed to the need for government bailouts. Some experts believe these shadow institutions had become as important as commercial (depository) banks in providing credit to the U.S. economy, but they were not subject to the same regulations. These institutions as well as certain regulated banks had also assumed significant debt burdens while providing

14541-439: The spread of plague. At the time of incorporation in 1852, Oakland had consisted of the territory that lay south of today's major intersection of San Pablo Avenue, Broadway, and Fourteenth Street. The city gradually annexed farmlands and settlements to the east and the north. Oakland's rise to industrial prominence, and its subsequent need for a seaport, led to the digging of a shipping and tidal channel in 1902. This resulted in

14672-481: The systemic ramifications of domestic regulatory actions. Federal Reserve Chair Ben Bernanke testified in September 2010 regarding the causes of the crisis. He wrote that there were shocks or triggers (i.e., particular events that touched off the crisis) and vulnerabilities (i.e., structural weaknesses in the financial system, regulation and supervision) that amplified the shocks. Examples of triggers included: losses on subprime mortgage securities that began in 2007 and

14803-444: The third largest mortgage lender in the country. In 1997, Catalyst , a nonprofit women's research group, found that Golden West Financial had one of the highest percentages of women on their board of directors within any Fortune 500 company, with 5 women and 4 men. At the same time, the United States government set up Freddie Mac to provide assistance for first time or low income home buyers who may not have received assistance from

14934-518: The ultimate factor in Wachovia's fall. The October 4, 2008 episode of Saturday Night Live lampooned the Wachovia takeover of Golden West Financial during a segment on the financial bailout. Darrell Hammond , as Herb Sandler, states that "My wife and I had a company which aggressively marketed subprime mortgages, and then bundled them as securities to sell to banks such as Wachovia. Today, our portfolio's worth almost nothing, though, at one point, it

15065-552: The value of mortgage-backed securities, which eroded the net worth and financial health of banks. This vicious cycle was at the heart of the crisis. By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. This major and unexpected decline in house prices means that many borrowers have zero or negative equity in their homes, meaning their homes were worth less than their mortgages. As of March 2008, an estimated 8.8 million borrowers – 10.8% of all homeowners – had negative equity in their homes,

15196-478: The value of these securities dropped, investors demanded that these hedge funds provide additional collateral. This created a cascade of selling in these securities, which lowered their value further. Economist Mark Zandi wrote that this 2007 event was "arguably the proximate catalyst" for the financial market disruption that followed. Several other factors set the stage for the rise and fall of housing prices, and related securities widely held by financial firms. In

15327-440: The women. The incident received nationwide coverage. The company that owns the house later said they would sell it to a nonprofit affordable housing group. As of 2019, Oakland's per-capita homeless rate was higher than San Francisco and Berkeley. Between 2014 and 2020, Oakland strengthened its protections for tenants in order to reduce the displacement of its long-time residents. Between January 2020 and March 2022, Oakland suffered

15458-635: The years before the crisis, the behavior of lenders changed dramatically. Lenders offered more and more loans to higher-risk borrowers. Lending standards deteriorated particularly between 2004 and 2007, as the government-sponsored enterprise (GSE) mortgage market share (i.e. the share of Fannie Mae and Freddie Mac , which specialized in conventional, conforming , non-subprime mortgages) declined and private securitizers share grew, rising to more than half of mortgage securitizations. Subprime mortgages grew from 5% of total originations ($ 35 billion) in 1994, to 20% ($ 600 billion) in 2006. Another indicator of

15589-522: The years leading up to the crisis, the U.S. received large amounts of foreign money from fast-growing economies in Asia and oil-producing/exporting countries. This inflow of funds combined with low U.S. interest rates from 2002 to 2004 contributed to easy credit conditions, which fueled both housing and credit bubbles . Loans of various types (e.g., mortgage, credit card, and auto) were easy to obtain and consumers assumed an unprecedented debt load. As part of

15720-458: Was 127% at the end of 2007, versus 77% in 1990. While housing prices were increasing, consumers were saving less and both borrowing and spending more. Household debt grew from $ 705 billion at year end 1974, 60% of disposable personal income, to $ 7.4 trillion at yearend 2000, and finally to $ 14.5 trillion in midyear 2008, 134% of disposable personal income. During 2008, the typical US household owned 13 credit cards, with 40% of households carrying

15851-648: Was 9.8 times the December 2007 sales volume, the highest value of this ratio since 1981. Furthermore, nearly four million existing homes were for sale, of which roughly 2.2 million were vacant. This overhang of unsold homes lowered house prices. As prices declined, more homeowners were at risk of default or foreclosure. House prices are expected to continue declining until this inventory of unsold homes (an instance of excess supply) declines to normal levels. A report in January 2011 stated that U.S. home values dropped by 26% from their peak in June 2006 to November 2010, more than

15982-507: Was a market for low-quality private label securitizations. They argued that a "Giant Pool of Money" (represented by $ 70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. Further, this pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income-generating investments had not grown as quickly. Investment banks on Wall Street answered this demand with financial innovation such as

16113-462: Was announced on May 7, 2006, with a price of a little under $ 25.5 billion. The merger was completed in October 2006. The subprime mortgage crisis caused the timing of the acquisition by Wachovia to harm that company's financial situation. World Savings lending volume dipped again in 2006 shortly after the sale to Wachovia was initiated. This prompted World Savings to attract more borrowers by taking

16244-524: Was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve's failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for

16375-467: Was from July 1997 to June 1998 with 47.76 inches (1,213.1 mm) and the driest from July 2020 to June 2021 with 8.03 inches (204.0 mm). The most rainfall in one month was 15.35 inches (390 mm) in January 1911. The most rainfall in 24 hours was 4.75 inches (121 mm) on December 31, 2022. Rainfall near the bayfront is only 23 inches (580 mm), but is higher in the Oakland Hills to

16506-631: Was more accurate than blaming the crisis on lower-income, subprime borrowers. A 2011 Fed study had a similar finding: "In states that experienced the largest housing booms and busts, at the peak of the market almost half of purchase mortgage originations were associated with investors. In part by apparently misreporting their intentions to occupy the property, investors took on more leverage, contributing to higher rates of default." The Fed study reported that mortgage originations to investors rose from 25% in 2000 to 45% in 2006, for Arizona, California, Florida, and Nevada overall, where housing price increases during

16637-409: Was more pronounced in coastal areas where the ability to build new housing was restricted by geography or land use restrictions. This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by the price appreciation. US household debt as a percentage of annual disposable personal income

16768-470: Was moved to Fremont in southern Alameda County. Also in 1916, the Fageol Motor Company chose East Oakland for their first factory, manufacturing farming tractors from 1918 to 1923. By 1920, Oakland was the home of numerous manufacturing industries, including metals , canneries, bakeries, internal combustion engines , automobiles, and shipbuilding. By 1929, when Chrysler expanded with

16899-469: Was soon established four miles (6.4 km) to the southwest. During World War II, the East Bay Area was home to many war-related industries. Oakland's Moore Dry Dock Company expanded its shipbuilding capabilities and built over 100 ships. Valued at $ 100 million in 1943, Oakland's canning industry was its second-most-valuable war contribution after shipbuilding. The largest canneries were in

17030-498: Was within the shares given to Antonio Maria and Vicente. The portion of the parcel that is now Oakland was called Encinar (misrendered at an early date and carried forward as "encinal") – Spanish for " oak grove " – due to the large oak forest that covered the area, which eventually led to the city's name. According to Stanford University historian Albert Camarillo, the Peralta family struggled to keep their land after

17161-654: Was worth close to $ 19 billion." In response to the show, the real Herb Sandler said he had been "listening to this crap for two years" and "we are being unfairly tarred." Oakland, California Oakland is a city in the East Bay region of the San Francisco Bay Area in the U.S. state of California . It is the county seat and most populous city in Alameda County , with a population of 440,646 in 2020. A major West Coast port, Oakland

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