The right answer is option D.Meaning: The flood of home foreclosures caused housing prices to drop precipitously. This led to the write-downs of mortgaged-backed securities and fears of a Great Depression-like downward spiral. What led to the write-downs and fears? The housing prices caused by flood of home foreclosures. So essentially, the write-downs and fears are the results of the preceding clause, The flood of home foreclosures that followed the large economic recession in 2008 caused housing prices to drop precipitously. Based on this understanding, a which clause is not appropriate to convey the result of an action in a sentence. We need a verb-ing modifier. We can, therefore, eliminate options A, B, and C.
Between D and E, the comma after and in E is not necessary. We need to express the write-downs of mortgaged-backed securities and fears of a Great Depression-like downward spiral to be parallel to each other. Option D rightly expresses parallelism in the write-downs and fears in parallel. The answer is, therefore, option D in my view.
The flood of home foreclosures that followed the large economic recession in 2008 caused housing prices to drop precipitously, which lead to the writing down of mortgage-backed securities, and, to fears of a Great Depression-like downward spiral.
(A)
which lead to the writing down of mortgage backed securities, and, to fears of a Great Depression-like downward spiral
(B)
which led to the write downs of mortgage backed securities and fears of a Great Depression-like downward spiral
(C)
which lead to the write down of mortgage backed securities and the fears of a Great Depression-like downward spiral
(D)
leading to write downs of mortgage backed securities and fears of a Great Depression-like downward spiral
(E) l
eading to write downs of mortgage backed securities
and, fears of a Great Depression-like downward spiral