Proceedings of the International Management Conference
Year: 2024
DOI:
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The Global Financial Crisis 2007-2008 and its Repercussions on the American Economy
Deepto Chakraborty and Alif Mamnoon
ABSTRACT:
Throughout American economic history, if we navigate and skim through the historical snippets of economic downturns in America, the Global Financial Crisis of 2007-2008 can be attributed as the major economic catastrophe in modern economic history. The global financial crisis has been the amalgamation of the unprecedented levels of bank loan disbursement that led the US economy to the housing bubble and the subsequent subprime mortgage crisis. This monumental financial crisis significantly damaged financial institutions, investment banks, and most importantly financial sectors. The US government encountered a steep decline in consumer wealth and protracted unemployment. Well-esteemed financial institutions, for example, Lehman Brothers, and Goldman Sachs grappled with financial insolvency which precipitated the American government’s multiple interventions and bailouts. We can also observe that American top-tier banks encountered a liquidity crisis that was protracted until the legislation of the Dodd-Frank Act 2010 by the US Congress. Dodd-Frank Act 2010 was a monumental United States federal law passed in 2010. Dodd-Frank prompted Wall Street reform and consumer rights protection then. The US government started taking on different policies and reforms and implemented effective monetary policy to bounce back the American economy under the prudent and judicious leadership of former Federal Reserve Chairman Ben Bernanke. So, it can be concluded that the Global Financial Crisis 2007-2008 has been a great challenge for the US economy.
keywords: Financial Crisis, Liquidity Crisis, Dodd-Frank Act, Monetary Policy