1. consequences
    1. Spread around the world
      1. *China's manufacturing sector is down. More than 10 million workers are unemployed. *Singapore's exports shrank by 30 percent.
    2. For America
      1. *“Lehman Brothers”and “Merrill lynch” were acquired. * AIG was taken over by the government. * Lehman's failure caused the commercial-paper market to collapse. *After the 1980s, manufacturing declined. * In 2008, the securitization food chain broke. * “General Motors”and “Chrysler” faces bankruptcy. * The criteria for college became affordability.
    3. For the academic economics itself
      1. Economists have emerged as the main proponents of deregulation. They worked as consultants in order to get more pay.
  2. Causes
    1. Strict regulation of the financial sector
      1. Most savings banks forbid the use of savings deposits for speculative trading.
    2. In the 1980s, investment banks went public
    3. In 1982, restrictions on savings companies were relaxed
      1. Deposits are allowed to be invested. In the late 1980s, hundreds of savings and loan companies went bankrupt.
    4. Several large corporate financial systems merged
      1. 1998,Citicorp and Travelers merged.They broke one law of”Glass-Steagall Act”
    5. In the late 1990s, investment banks invested in the stocks of the Internet bubble
      1. It crashed in 2001, $500 million was lost. Federal regulators did nothing.
    6. deregulation
      1. Financial firms were found to have engaged in improper practices.Credit Suisse helped Iran’s nuclear program and Iran’s Aerospare Industries raise money. The bank was fined $536 million.
    7. “Derivatives”began to explode
      1. Driving a $50,000 unregulated market
    8. Two conglomerates, three insurance companies and five banks, dominate the American financial sector
      1. Securitization food chain connect them together
    9. Securitization is a ticking time bomb
      1. *Lenders, investors don't worry about whether the borrower will be able to repay. *The rating agency is no longer responsible for evaluating CDO. *After 2000,investment banks preferred subprime
    10. 2001-2007 bubble economy
      1. *The SEC didn't make any changes to investment banks. *Investment banks borrowed heavily to create more CDO.
      2. Tens of billions of dollars into the securities industry chain
    11. AIG is the largest insurance company
      1. *Lots of CDS for sale. (People like to make profits with high risk) * Business entertainment accounts for 5% of CDS investors' income. * Late 2006, let customers advertise toxic “CDO”. In 2007, Goldman began selling specially designed “CDO”. * When hedge funds do not have mortgage-backed securities available, they work with banks to obtain them. * Institutions(Noody’s and S&P)make money by giving higher grades to risky securities.
    12. Caused by an out-of-control industry
  3. Background
  4. Conclusion
  5. In September 2008, American investment banks“Lehman Brothers”collapsed and AIG, the world's largest insurer, collapsed. Then stocks plunged, the global economy tanked, hundreds of billions of dollars were lost, and 30 million people lost their jobs.
  6. The crisis was caused by a banking and finance industry that was out of control. After the 1980s, because of the deregulation of the government, some people in the upper class became richer and richer, and gradually formed several giant companies. They make money by selling some corrupt stocks to their customers. At the same time, the growth of derivative financial products has made the market more volatile. Subprime mortgages were the riskiest investments and led to one of the biggest economic bubbles in history. Rating agencies also gave higher ratings to risky securities, giving securities firms more freedom to do as they please. The government is still doing little to punish them. So finance betrayed society and corrupted the political system.