The two agencies themselves hold or guarantee more than $5 trillion, or half, of the nation's mortgages. Wall Street's fears that these loans will default have caused Fannie's and Freddie's shares to tumble, making it more difficult for the private companies to raise additional capital themselves. (Source: AP, Paulson braces public for months of tough times, July 21, 2008. AFP, US Treasury rescue of Freddie, Fannie at $25 Billion, July 22, 2008)
U.S. Treasury Secretary said no to further Wall Street bailouts. As a result, Lehman Brothers investment bank filed for bankruptcy, Merrill Lynch sold itself to Bank of America, and turned to the Federal Reserve for emergency funding.
It wasn't only the financial bigwigs who spoke up. Even the outriders of the NewEra felt that if everybody pretended to be happy, their phoney smiles would blow the trouble away. Jimmy Walker, for example, asked the movie houses to show only cheerful pictures. TrueStory Magazine, currently suffering from delusions of grandeur, ran full page advertisements in many papers urging all wage earners to buy luxuries on credit. That would fix things right up. McGraw-Hill Company, another publishing house with boom-time megalomania, told the public to avert its eyes from the obscene spectacle in Wall Street. What they did not observe would not affect their state of mind and good times could continue as before.
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WASHINGTON - A year after prodding financial regulators to act more swiftly to rein in Wall Street, President Barack Obama on Monday claimed progress in toughening banking rules but urged bank overseers to consider additional ways to prevent the kind of risk-taking that precipitated the 2008 financial crisis.
That regulation, known as the Volcker Rule, is considered one of the more significant changes to financial laws because it seeks to rein in high-risk trading on Wall Street. Though adopted, however, that rule won't take effect for the biggest banks until mid-2015.
That same day, Federal regulators agreed to let and take on another $200 billion in subprime mortgage debt. The two government-sponsored enterprises (GSE) would buy mortgages from banks, a process that is known as buying on the . They then package these into and resell them to investors on Wall Street. All will go well if the mortgages are good, but if they turn south, then the two GSE's would be liable for the debt. (Source: Washington Post, , March 21, 2008)
The devastated Wall Street, Main Street, and the banking industry. The and the spent hundreds of billions of dollars to add to the to avoid a . They barely succeeded.
On July 23, U.S. Treasury Secretary Henry Paulson made the Sunday talk show rounds to explain the need for a of and . The two government-sponsored enterprises (GSE) buy mortgages from banks, a process known as buying on the . They then package these into and resell them to investors on Wall Street.
Paulson was unwilling to let the government take on all risk in the financial markets, thereby letting banks off the hook for making bad decisions during the . Paulson felt that the government bailout of Bear Stearns and Fannie Mae and Freddie Mac was enough. (Source: The Economist, Nightmare on Wall Street, September 15, 2008)
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and , two of the most successful investment banks on Wall Street, applied to become regular commercial banks. They wanted the protection of Federal Reserve.
The stock market collapsed when the U.S. House of Representatives rejected the bailout bill. Opponents were rightly concerned that their constituents saw the bill as bailing out Wall Street at the expense of taxpayers. But they didn't realize that the future of the global economy was at stake.
Wall Street financers were able to reverse the downward plunge only by buying as many shares of stock as they could over the next two days. It was a temporary victory. Monday's opening bell unleashed a frenzy of selling that soon turned into an uncontrolled panic that continued for the rest of the trading day. The following day Black Tuesday, October 29 saw the previous day's panic turn into bedlam on the trading floor.