Credit Crisis of 2008

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In the fall of 2008, a credit squeeze grew into Wall Street's biggest crisis since the Great Depression. Hundreds of billions in mortgage-related investments went south, and investment banks that once ruled high finance crumbled or reinvented themselves as commercial banks. The nation's largest insurance company and largest savings and loan were seized by the government. Many believed that the passage by Congress of a $700 billion bailout plan[1][2] in October of 2008 and actions by the Federal Reserve to pump money into the system headed off a full-scale meltdown.[3]

After the financial crisis that began in 2008, the Financial Crisis Inquiry Commission (FCIC) was formed to study how fraud, regulatory lapses, monetary policy, accounting, lending practices and executive pay contributed to the U.S. financial crisis.[4] A report of the commission's findings were to be reported to the U.S. Congress and President of the United States by Dec. 15, 2010.[5]

According to remarks made by Federal Reserve Chairman Ben Bernanke in November 2009 to an investigative panel, 12 of the 13 most important U.S. financial firms were at the brink of failure at the height of the credit crisis in 2008.[6]

In July 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, in hopes of avoiding a repeat of the financial crisis. Among the provisions of Dodd-Frank are regulation of the $400 trillion swaps market, systemic risk oversight, and enhancements to consumer protection. [7]

References

  1. Credit Crisis - Bailout Plan (TARP). The New York Times.
  2. Financial Bailout May Cost Less Than Thought. The New York Times.
  3. Credit Crisis - The Essentials. The New York Times.
  4. Nominees emerge for U.S. panel on Wall Street meltdown. Reuters.
  5. About the Commission. Financial Crisis Inquiry Commission.
  6. Bernanke says all but one major firm at risk in 2008. Reuters.
  7. Senate Passes Finance Bill. The Wall Street Journal.