system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: What exactly happened during the stock market crash of '08 and why did the American public suffer so greatly and for so long afterwards?

Everyone always talks about the crash and the Depression that followed, but I never quite understood every aspect. I want to know how inflation, real estate, and major corporations come into the picture. Please help!
gpt
The (relatively) short version:

Banks found ways to lend money to people to purchase homes who would have, in the past, been considered to risky to lend to by spreading the risk around to other investors. This fed a housing bubble because there was a huge growth in demand for homes and people bought in hoping the price of real estate would keep rising. 

Obviously, it didn't, and when real estate markets crashed a lot of big banks found themselves with a lot of mortgages that were never going to get paid off. This threatened to shut down the financial sector. When banks stop lending economic activity slows massively. While bank bailouts averted a complete credit freeze and collapse of the financial sector, the crisis still led to a massive recession.