Federal Reserve And The 2008 / 2009 Financial Crisis

Federal Reserve and the 2008/2009 Financial Crisis: What they did and Why In the late 2007, early 2008 the United States and the world was hit with the most serious economic downturn since The Great Depression in 1929. During this time the Federal Reserve played a huge role in assuring that it would not turn into the second Great Depression. In this paper, we will be discussing what the Federal Reserve did during this time, including a discussion of our nation’s three main economic goals which are GDP, employment, and inflation. My goal is to describe the historic monetary and fiscal policy efforts undertaken by the U.S. Government and Federal Reserve, including both the traditional and non-traditional measures to ease credit markets and stimulate the economy. First, I want to give you a little background on the Financial Crisis of 2008/2009. The Financial Crisis began in December of 2007, and by the fall of 2008 the economy was in a huge downfall. This all began in August of 2007 because of defaults in the subprime mortgage market, which sent a shu dder through the financial markets. The former chairman of the Federal Reserve described the crisis of 2008/2009 as a â€Å"once-in-a-century credit tsunami†. Many firms, including commercial banks, Wall Street firms, investment banks, all suffered significant losses and eventually went bankrupt. This caused households and smaller businesses to have to pay higher rates on the money that they borrowed. This downfall wasn’t justShow MoreRelatedHow Government Economic Policies Caused the Financial Crisis of 20081553 Words   |  7 PagesThe financial crisis in 2008 that led to a crisis in the banking sector, and which nearly led to a complete collapse of the economy globally, was not only caused by changes in the regulatory, regulation and legislation oversight, but also fiscal and monetary policies. Many believe that, expansion of excesses monetary and irresponsibility of some of the government agencies led to the crisis. According to reports by Taylor (2009), excesses monetary policies were the main cause of the 2008 financialRead MoreThe Financial Crisis Was Triggered By A Complex Interplay Of Policies972 Words   |  4 PagesThe financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for subprime borrowers, overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate, questionable trading practices on behalf of both buyers and sellers, compensation structures that prioritize short-term deal flow over long-term value creation, and a lack of adequate capital holdings from banks and insurance companiesRead MoreThe Global Financial Crisis Of Broward College920 Words   |  4 PagesResearch Paper: The Global Financial Crisis Michelle Beira Broward College There have been few financial crises in the United States. The Global Financial Crisis of 2008 to 2009 was the most recent and before that was The Great Depression of the 1930s. The Global Financial Crisis actually began in 2007 when prices of homes tanked. It not only affected the U.S. but it also affected economies overseas. The entire investment banking industry, some of the biggest insurance companies, enterprisesRead MoreU.s. Government And Federal Reserve927 Words   |  4 PagesIn the late 2007, early 2008 the United States and the world was hit with the most serious economic downturn since The Great Depression in 1929. During this time the Federal Reserve played a huge role in assuring that it would not turn into the second Great Depression. In this paper, we will be discussing what the Federal Reserve did during this time including a discussion of our nation’s three main economic goals which are GDP, employment, and inflation. My goal is to describe the historic mon etaryRead MoreHelping The United States During The Time Of Financial Crisis1103 Words   |  5 Pagesassisted in regaining the financial system and bringing the economy back to good terms at the peak of the financial crisis. Together they helped stop the financial system from upturning, and with tremendous effort, helped reestablish financial and economic stability. The United States’ central bank is known as the Federal Reserve, and they are accountable for making sure the country’s financial system functions effortlessly. During the crisis of 2007-2009 the Federal Reserve was passive and did notRead MoreThe Global Financial Crisis During The Great Depression Of The 1930s1103 Words   |  5 PagesGLOBAL FINANCIAL CRISIS† A financial crisis is a situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. Contents: ïÆ' ¼ Introduction ïÆ' ¼ Causes of the Crisis ïÆ' ¼ Impact of financial crisis ïÆ' ¼ Solution of financial crisisRead MoreImpact Of The Sub Prime Crisis1687 Words   |  7 PagesImpact of the U.S sub-prime financial crisis in US. The impacts in USA were Real gross domestic product (GDP) began contracting, Rise in Unemployment rate, Housing investments fell, Housing prices fell, Stock Markets prices fell, Net worth of US housings and non-profit organizations fell, rise in the national debt percentage, decline in manufacturing and trade. †¢ The Real gross domestic product (GDP) began shrinking in the third quarter of 2008 and did not return to growth until Q1 2010. †¢ The unemploymentRead MoreThe Financial Crisis : Rescue Efforts855 Words   |  4 PagesThe Financial Crisis: Rescue Efforts Throughout the early 2000’s, relaxed lending regulations and lowered interest rates sparked the growth of the securitization of subprime mortgages. In order to increase profit and revenue, a number of financial institutions became heavily involved in the process of securitizing the loans. When house prices began to fall in 2006, homeowner delinquencies and foreclosures increased causing many institutions to become overleveraged. As a result, the destabilizationRead More2008 Us Economic Recession1709 Words   |  7 PagesINTRODUCTIONS The  Global Financial Crisis  of 2008 is considered by many economists to be the worst  financial crisis  since the  Great Depression  of the 1930s. It resulted in the threat of total collapse of large financial institutions, the  bailout  of small and big banks by national governments, and downturns in stock markets around the world. In United States, the housing market also suffered, resulting in  evictions,  foreclosures  and prolonged unemployment. The crisis played a significant role inRead MoreThe Great Recession in the year 20081063 Words   |  5 PagesRecession 16Specifically, Freund (2009) defines global downturns as years when world real GDP growth is (1) below 2 percent, (2) more than 1.5 percentage points below the previous five-year average, and (3) at its minimum relative to the previous two years and the following two years. 1975, 1982, 1991, 2001, and 2008 Freund (2009) describes the evolution of world trade following four previous global downturns. She finds that the size of the decline in world trade during these episodes is