International Political Economy

What major bank collapsed in September 2008?

Lehman Brothers

Why did the US government chose not to bail out Lehman Brothers?

they wanted banks to take responsibility for their own actions

What happened after Lehman Brothers collapsed?

panic spread and trust in the financial system was lost

Why did AIG need a bailout?

they had insured risky investments and could not pay when they failed

How did the government respond to AIG’s crisis?

they bailed them out with billions of dollars to stabilize the system

What caused the banking system to freeze?

banks stopped lending to each other because they feared they would not be repaid

What was the $700 billion dollar government bailout plan called?

TARP troubled asset relief program

What were some effects of this crisis?

millions lost jobs and homes, the stock market crashed

What were the main causes of the crash?

risky home lones, houding bubble burst, and lack of regulation

What is a key lesson from the crisis?

banks must lend responsibly, and governments need strong financial regulations