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How Did Too Big To Fail

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Too Big to Fail
In early 2008, the economy was at an all time high.Americans had great confidence in the economy. People were spending money without, giving it a second thought.Nobody thought of regulating the economy to make sure it doesn’t crash because everyone was making too much money. The real estate market played a very big role in the stock market crash of 2008. At the time the real estate was market was booming. Owning a house was considered as part of the American dream, therefor everyone was either buying, building, or sell a house. Because Americans had great confidence in the economy,many Americans spent their money lavishly. Most people were buying houses they knew they couldn’t afford.

Everyone had such high hopes in the economy that nobody expected or thought that is would crashed as bad is it did. As the housing market value dropped, the next blow came when the value of Bear Stearns, a major …show more content…

General Electric, the world’s largest company, was no longer able to finance their day to day operation. Americans began asking for loans from banks and making bank runs.The government decided that another bailout was not the solution, because they can't keep bailing out every bank that goes down. They needed a permanent solution that can and will work for every bank.

In order to stop the economy from going into another Great Depression, the government came up with two solutions. One of the solutions was the T.A.R.P. plan.T.A.R.P., which stands for Troubled Assets Relief Program, was put in place to help banks get rid of their toxic assets. The government would buy out the bank's toxic assets, and unload the assets when the economy got better with the hope that the treasury would then get its money back.The plan was originally rejected by congress, but was later passed.Buying toxic assets was still not a good idea because it would take months, time in which they did not

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In their panic, millions of Americans had withdrawn their life savings from the banks. Relief programs such as the Emergency Banking Act aimed to stop the nation wide panic that was running rampant, while also preventing the American economy from collapsing completely. The Emergency Banking act proved to be successful, and in the two weeks following the National Bank Holiday of 1933, over 65% of the wealth hoarded by the public was returned to the banks. These relief efforts, along with Roosevelt’s Fireside Chats, persuaded the American people to have faith in the American economy. This led to private investment in industry growing from $2 billion in 1933 to $10 billion in 1939.

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