Recovery of the 2008 Financial Crisis

The financial crisis of 2008 is known as the great recession of the United States. It lasted for 18 months with the GDP decline of 4.3%. The economic downturn was the longest since World War II which lasted from December 2007 to June 2009. The financial crisis occurred due to implosion of mortgage-backed securities and the collapse of housing bubble of 2000s. The deregulations in the financial industry and bad investments on mortgage-backed securities led the downfall of the entire US economy. Between 2006- 2009, the home prices fell to approx. 30%. The unemployment rate which was 5% in 2007 rose to 10% in October 2009 and the net worth of US individuals and charity organizations dropped from around $69 trillion in 2007 to around $55 trillion in 2009. To address the crisis, Congress passed the Emergency Economic Stabilization Act of 2008. Troubled Asset Relief Program (TARP), created by the act was a program initiated and led by the United States government in order to stabilize the financial system of the country and restore economic growth. It helped to capitalize the financial sector and prevented what could have been the complete disappearance of financial intermediation for many years. The Treasury Department temporarily insured money market mutual funds, putting an end to the institutional selloff that began in mid-September.