The economic crisis of 2007-09 was deep and prolonged enough to be known as "The Great Recession" and was followed by what was, according to some, a long but unusually slow recovery marked by monetary and fiscal policy initiatives without . precedents and new regulations.

The period known as the Great Moderation came to an end when the decade-long expansion in US housing market activity peaked in 2006 and residential construction began to decline. In 2007, losses on mortgage-related financial assets began to strain global financial markets and banks' financial statements. In December 2007, the US economy entered a recession. That year, several large financial companies experienced financial difficulties, numerous banks failed, and many financial markets experienced significant turmoil. In response, the Federal Reserve and the US government provided liquidity and support through a variety of programs motivated by the desire to improve the functioning of financial markets and institutions and thereby limit the damage to the US economy. However, in the fall of 2008, the economic contraction began and eventually became deep and prolonged enough to earn the label "The Great Recession." by some unusually slow measurements. The Federal Reserve provided unprecedented monetary easing in response to the severity of the contraction and the gradual pace of the subsequent recovery. The US government forced many major banks to issue special preferred stock, which the government purchased to ensure these banks were adequately capitalized and to provide peace of mind for depositors. The years that followed saw the passage of new laws and regulations, highlighted by the Dodd-Frank Financial Reform Act. These laws and regulations were an attempt to ensure that the US government to bail out the financial system again..

The document should address the following topics:

1) Analyze the role that the banking sector admits in the contribution to the beginning and the escalation of the financial crisis and the subsequent recession. Be sure to look at the specific banking products that will contribute to the problems. 2) Evaluate the tools and actions of the Federal Reserve and the US government during the crisis and the post-crisis. Did these results create a safer and more secure financial system? 3) Evaluate credit policies and the depth of risk management strategies of the banking system before the financial crisis. Did these policies contribute to or exacerbate the situation? 4)Examine the legal and ethical issues derived from moral hazard present in the banking and financial sector. Pay particular attention to the decision to allow Lehman Brothers to fail while other banks receive bailouts.

Answer rating: 100% (QA)

Answer 1 The banking sector played a significant role in contributing to the onset and escalation of the financial crisis One of the key factors was the proliferation of subprime mortgages and the sec... View the full answer