The 2008 Financial Crisis

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On September 15, 2008, Wall Street entered the largest financial crisis since the Great Depression. On a day that could have been called Black Monday, the Dow Jones Industrial average plummeted almost 500 points. Historically prominent investment giant Lehman Brothers filled for bankruptcy, while Bank of America bought out former powerhouse Merrill Lynch (Maloney and Lindeman 2008). The crisis enveloped the economy of the United States, as effects are still felt today. Experts still disagree about what exactly caused the greatest financial disaster since the Great Depression, but many point to the repeal of the Glass-Steagall Act of 1933 as a gateway to the rise of extreme laissez-faire policies that allowed Wall Street to take on incredible risk at the expense of taxpayers. In the wake of the crisis, politicians look for policies that reign in the power of Wall Street, but the fundamental relationship between economic and political power has made such regulation ineffective. The Glass-Steagall Act of 1933 was a direct response to the Great Depression of the 1930s. The years before the Depression were marked by robust financial growth, led by an expansion of credit through the policies of the Federal Reserve and new financial innovation, such as investment trusts (Neal and White 2012). Though these trusts were similar to a savings bank, they differed in that trusts were not regulated in which securities they could invest in and had had little government supervision. The

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