The financial crisis of 2008 had a unprecedented effect on the global banking industry. This interactive graphic charts the changing fortunes of 16 of the world’s leading banks since 2007.
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COMMENTARY: How exactly did the Global Financial Crisis of September 2008 occur? It was a Domino Effect of a series of economic crashes and bubbles one after another. Banks in the U.S. and overseas felt the full brunt, as their liquidity virtually vanished overnight. In the U.S., the U.S. Treasury Department and Federal Reserve came in and bailed out over 200 major banks. The central banks of foreign countries did the same thing.
Today the construction and housing industries still remain anemic, with deliquincy and foreclosure rates the highest since the Great Depression. Employers are not hiring full-time workers, relying mostly on part-timers and temporary workers. So long as these industries remained mired in a quagmire and the unemployment rate remains high, most major U.S. banks are very hesitant to lend, or do so only with their most creditworthy borrowers. As a consequence, they have accumulated well over $2 trillion in cash in excess of their federal reserve banking reserve requirements.
The following chart pretty much puts things into perspective:
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ThinkRealibility produced a highly detailed "2008-2009 Financial Mess Cause Map" which showed the cause and effect of the events resulting in the U.S. Financial Meltdown of 2008 in greater detail. You can view it HERE.
The U.S. financial system nearly collapsed when a record $140 billion was withdrawn from money market accounts by depositors. To prevent a total meltdown of the U.S. financial system, President Bush signed into law the Emergency Economic Stabilization Act or EESA in October 2008 which created a $700 billion fund to help bailout nearly 555 financial institutions.
The U.S.Treasury Department used $115 billion of EESA funds to buy preferred stock in eight banks: Bank of New York Mellon, Goldman Sachs, J.P. Morgan, Morgan Stanley, Bank of America/Merrill Lynch, Citigroup, Wells Fargo, and State Street. The remaining $585 billion was to be used purchase the troubled assets (primarily worthless or near-worthless mortgage backed securities) of nearly 555 banks including emergency funds for the troubled U.S. auto industry. The latter became known as the Troubled Assets Relief Program or TARP. You will find a comprehensive list of the banks the federal government bailed out HERE.
Congress only authorized $350 billion of the $700 billion to be lent out in 2008. The other $350 billion was saved for President Obama when he took office in 2009. Obama never used the TARP funds. Instead, he launched the $787 billion Economic Stimulus package. Second, the government bought bank stocks when the prices were depressed and sold later, when prices were higher. By 2010, banks had paid back $194 billion into the TARP fund, more than the $190 billion that was still outstanding. Third, the bill required the President to develop a plan to recoup losses from the financial industry if needed.
Courtesy of an article dated September 8, 2011 appearing in Financial Times
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