This paper explains that the depth insight into economic recession and the reason and solutions for economic recession. The world economic slowdown which had its epicenter in the developed economies has now found its way into the developing economies also. One such reason is banks and their loan policies which lead to subprime crises. The economy was at risk of a deep recession after the dotcom bubble burst in early 2000 this situation was compounded by the September 11 terrorist attacks that followed in 2001. In response central banks around the world tried to stimulate the economy. They created capital liquidity through a reduction in interest rates. In turn, investors sought higher returns through riskier investments.