Financial Fiasco

Abstract

The financial crisis that shocked our nation at the end of 2007 is one of the most compelling and complex disasters of our time. It is not only very intriguing and interesting to economists but also to the everyday consumer. As a result of this crisis, huge losses accumulated and the United States experienced a severe credit crunch, which limited the ability of consumers to take out loans, even if their credit was nearly perfect. How did the government attempt to cope with this catastrophic event and what needs to be done to limit the possibility of a similar occurrence in the future? These are precisely the questions this research project seeks to answer. The purpose of this research project was to examine, detail and identify the primary and secondary causes that contributed to the crisis. Gaining a better understanding of what precipitated this massive meltdown then allows me to examine and understand the programs implemented by the government in response to these problems. Using this knowledge of the multiple root causes of the crisis along with econometric studies of select liquidity programs, I can then analyze the effectiveness of the programs that were implemented by the Fed. After seeing what issues these programs targeted and how effective they are in addressing the causes of the crisis, I am better able to develop my own stance and perspective on this crisis, the flaws in the existing financial architecture and formulate my own provisional ideas on what policies and level of intervention are needed moving into the future.