Final answer:
The major factor contributing to the high profit margins of the early 2000s was a complex mix of financial industry deregulation, risky lending practices, and internal cost-cutting measures by corporations, all of which preceded the financial crisis of 2008 and the significant government intervention that followed.
Step-by-step explanation:
The greatest factor in the unprecedented profit margins of the early 2000s, according to economics at JP Morgan Chase, can be attributed to a combination of deregulation, a lack of oversight in the financial industry, and risky financial practices that led to the Great Recession. The period before the 2008 financial crisis was marked by high profits for financial institutions, masking the underlying instability. Critics of the financial sector pointed out the detrimental effects of deregulation and the dangers of a few large banks holding too much influence over the economy.
In the lead up to the crisis, firms ignored warnings about the risky loans they had amassed, which contributed to inflated profit margins. Financial institutions like Bear Stearns faced bankruptcy, which sent shockwaves through the economy in 2008. Moreover, the recession of 2009 through 2013 period saw S&P 500 companies' profits grow to 9.7% despite a weak economy, largely due to cost cutting and reductions in input costs, further emphasizing the critical role that internal business strategies played in driving profit margins.
These practices, along with high-risk mortgage loans and a surge in consumer debt, culminated in a financial system ripe for collapse, eventually leading to the crisis that necessitated a massive government bailout.