Recession and Resulting Banking Failures

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An Analysis of the 2008 Recession and Resulting Banking Failures Executive Summary The financial crisis of 2008, which caused the most damage in world economies between the years 2007 and 2009, has a long list of potential culprits that helped to initiate the crisis. The global economy has become so entangled that it is isolate a specific "first cause" or be able to point the blame at any one group in isolation. However, economists now have a whole range of specific causes in which they attribute to the crisis, yet this is still somewhat in dispute. In reality there are most likely a multitude of different factors that all contribute some role in the formation of the crisis. Some common culprits seem to be the repeal of the Glass Steagall Act, the creation of derivative trading, as well as the whole subprime area of lending. However, each of these factors did not exert its force in a vacuum. Markets today are extremely dynamic in nature and all of these factors played a domino role in destabilizing the others. The Roots of the Crisis The roots of the various bank failures, with hindsight, can be attributed to a range of different causes. As it has been argued, much of the entanglement of the banks' balance sheets can be traced back to the dismantling of the Glass-Steagall Act. The historic deregulation of the banking industry was achieved under President Clinton. This president passed regulations that reformed the essence of the way that banks can do business (Lal,
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