Failure of Continental Illinois Bank

The Bank of the United States was designed to make money and build an economy. It was designed by men like Alexander Hamilton and Robert Morris, but did not benefit the common citizen as much as wealthy investors. Why did a fledgling government need to borrow millions from overseas in order to invest in a “national” bank, to turn around and then borrow the same money back and pay interest on it? The banking system developed by Alexander Hamilton and Robert Morris was prime pickings for speculators, and laid the groundwork for a history of unscrupulous activity regarding our nation’s money supply that continues to this day. The signatures on the Constitution were barely dry before corruption and

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

The panic of 1907 and the Great Recession of 2007-2009 has both been major economic events in the United States economic history. This paper compares and contrasts these two major events and enables us to understand importance of certain financial institutions and regulations during troubled times in the financial sector. In this paper, both panics of 1907 and 2007 are historically analyzed and compared.

The Stock Market Crash played a major role in bank failures. After the crash, people were indifferent about the stability of banks, so they all began taking out their savings. Banks no longer had the currency to stay open. For those who did not take this

With railroads being down, banks who heavily invested in railroad stocks also failed. Soon all banks spiraled into an economic

Before the advent of the Federal Deposit Insurance Corporation (FDIC) in 1933 and the general conception of government safety nets, the United States banking industry was quite different than it is today. Depositors assumed substantial default risk and even the slightest changes in consumer confidence could result in complete turmoil within the banking world. In addition, bank managers had almost complete discretion over operations. However, today the financial system is among the most heavily government- regulated sectors of the U.S. economy. This drastic change in public policy resulted directly from the industry’s numerous pre-regulatory failures and major disruptions that produced severe economic and social

Once the US housing market collapsed, it created a credit crisis and crunch in the wider financial markets. Due to the complexity of CDOs many people had no idea how much they were really worth. Many of the CDOS were worthless and it was almost impossible to find the value of them (7). This led to a moral hazard problem whereby there was an overall caution of banks because many had no idea if they were even bankrupt. Inevitably, the interbank lending system crumbled whereby some banks stopped lending to each other and to corporations altogether or only lent with very high interest rates. Many banks who relied on interbank lending for money were heavily affected by this including Northern Rock. Inevitably, depositors of these banks become dubious of their banks financial situation and were provoked into withdrawing their money.

The banking crisis of the late 2000s, often called the Great Recession, is labelled by many economists as the worst financial crisis since the Great Depression. Its effect on the markets around the world can still be felt. Many countries suffered a drop in GDP, small or even negative growth, bankrupting businesses and rise in unemployment. The welfare cost that society had to paid lead to an obvious question: ‘Who’s to blame?’ The fingers are pointed to the United States of America, as it is obvious that this is where the crisis began, but who exactly is responsible? Many people believe that the banks are the only ones that are guilty, but this is just not true. The crisis was really a systematic failure, in which many problems in the

Bank Failures (Over 9,000 banks in the US and over 100,000 around the world failed as deposits were uninsured and people lost their savings. The surviving banks unsure of the economic situation and concerned for their own survival refused to

The recent financial crisis has a huge impact on systemic Important Financial Institutions; it’s distressing effect can be felt in almost every business area and process of a bank. A fairly large literature investigates the impact of financial crisis on large, complex and interconnected banks. The great recession did affect banks in different ways, depending on the funding capability of each bank. Kapan and Minoiu (2013) find that banks that were ex ante more dependent on market funding and had lower structural liquidity reduced supply of credit more than other banks during crisis. The ability of banks to generate interest income during the financial crisis was hampered because there was a vast reduction in bank lending to individuals and

Extensive research has determined that the banking industry is in an unstable state. The industry’s profits have

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, enterprises government used for mortgage lending, top mortgage lenders, the largest savings and loan companies, and two of the largest commercial banks were many of the financial sectors affected by the crisis. “Banks stopped making loans, share prices plunged throughout the world and most of the world plummeted into a recession” (The Financial Crisis of 2008: Year In Review 2008,” 2009, para. 1).

In 2008 the world faced the worst financial crisis since the great depression. Many banks closed their doors for good that year. Among them were both small and large banks. One specific bank that collapsed that year was IndyMac, one of the largest banks in the United States. IndyMac marked the largest collapse of a Federal Deposit Insurance Corporation (FDIC) insured institution since 1984, when Continental Illinois, which had $40 billion in assets, failed, according to FDIC records (“The Fall of IndyMac 2008). This paper will talk about the cause of the collapse of IndyMac in 2008, the handling of the issues, as well as the aftermath of the collapse.

In this essay I will be addressing the “Too Big To Fail” (TBTF) problem in the current banking system. I will be discussing the risks associated with this policy, and the real problems behind it. I will then examine some solutions that have been proposed to solve the “too big to fail” problem. The policy ‘too big to fail’ refers to the idea that a bank has become so large that its failure could cause a disastrous effect to the rest of the economy, and so the government will provide assistance, in the form of perhaps a bailout/oversee a merger, to prevent this from happening. This is to protect the creditors and allow the bank to continue operating. If a bank does fail then this could cause a domino effect throughout

This chapter is about the background of 2007-2008 financial crisis. The 2007-2008 financial crisis has a huge impact on US banking system and how the banks operate and how they are regulated after the financial turmoil. This financial crisis started with difficulty of rolling over asset backed commercial papers in the summer of 2007 due to uncertainty on the liquidity of mortgage backed securities and questions about the soundness of banks and non-bank financial institutes when interest rate continued to go up at a faster pace since 2004. In March 2008 the second wave of liquidity loss occurred after US government decided to bailout Bear Stearns and some commercial banks, then other financial institutions took it as a warning of financial difficulty of their peers. In the meantime banks started hoarding cash and reserve instead of lending out to fellow banks and corporations. The third wave of credit crunch which eventually brought down US financial system and spread over the globe was Lehman Brother’s bankruptcy in August 2008. Many major commercial banks in US held structured products and commercial papers of Lehman Brother, as a result, they suffered a great loss as Lehman Brother went into insolvency. This panic of bank insolvency caused loss of liquidity in both commercial paper market and inter-bank market. Still banks were reluctant to turn to US government or Federal Reserve as this kind of action might indicate delicacy of