Federal Reserve And The 2008 / 2009 Financial Crisis

1373 Words Jan 4th, 2016 6 Pages
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 shudder through the financial markets. The former chairman of the Federal Reserve described the crisis of 2008/2009 as a “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 just…
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