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The 2008 Financial Crisis: Dodd-Frank Wall Street Reform

764 Words4 Pages

The 2008 Financial Crisis, also known as the Global Financial Crisis, was an economic crisis that had worldwide repercussions. It originated in the United States housing market and quickly spread to financial markets around the world, leading to a global recession. The 2008 Financial Crisis was triggered by the bursting of the United States housing bubble, which led to a sharp decline in home prices, increased mortgage defaults, and the collapse of several major financial institutions (FDIC 2014). The crisis exposed the risks associated with subprime mortgage lending and the complex financial products that were created based on these risky loans. The major players in the crisis included financial institutions such as Lehman Brothers, Bear Stearns, and AIG, as well as mortgage lenders like Countrywide Financial and Washington Mutual (Weinberg 2013). These firms engaged in irresponsible lending practices and took excessive risks, which ultimately led to their downfall. One of the "villains" of the …show more content…

The crisis exposed the dangers of excessive risk-taking, regulatory failures, and the lack of transparency in financial markets. It also highlighted the need for stronger regulations to prevent a repeat of the crisis in the future. In the aftermath of the crisis, significant changes were made to legislation, stock trading, business practices, and consumer behavior to prevent a similar disaster from occurring. The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in the United States to strengthen regulation of the financial system, enhance transparency, and protect consumers from predatory lending practices (Berman 2023). Stock exchanges implemented circuit breakers and trading curbs to prevent excessive market volatility. Banks were required to hold more capital to absorb losses and reduce the risk of

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