"Inside the Meltdown" Response

     There are several factors that caused the Economic Crisis in 2008. The first problem was that Bear Stearns gambled on the housing market, allowed credit default swamps, had sup-premium mortgages, had borrowed heavily then a rumor started that Bear Stearns is running out of cash. In response to this the CEO gave a news company an interview, but it went bad. This all lead to Bear Stearns beginning to go under. In return this lead to the government lending JP Morgan money to give to Bear Stearns, but the government told JP Morgan to sell Bear Stearn stocks for $2 per share, all this made people lost faith in Banks. Then Fannie Mar and Freddie Mac lost 60% of their stocks due to miscalculations and bad bussiness, leading the government to fire and take over the two companies. Once this happened the Lehman Brothers company began to fail, but since the government told the banks they would bail no one else out, banks stopped lending money so the market froze, and Lehman Brothers had to declare bankruptcy. All this lead to a major crisis which was furthered by the fact the AIG went into major deficit, because they had major stock hold in Lehman Brothers. Seeing that AIG needed help or the entire economy system would fail the government lent AIG $85 billion, making AIG nationalized. When the government realized they had to take action they proposed a full scale bank bailout, but the first bill failed in Congress, which lead to the Dow downfall making the market crashed. Due to the market crashing Congress passed a revised bill. All these factors lead to an entire global economy, making the US government call a meeting with the nin e largest banks and making them sign a deal. This deal consisted of the government loaning all the banks money, meaning they took a stake in all the banks. These factors made Obama spend $350 billion so far in his first term.
     These factors stated above can all be found in the flow chart at the beginning of this post.