This blog post is my outlook on the
documentary “Inside the Meltdown” by PBS.org. In February 2009 this documentary
was released, which was focused on the economic struggle America put itself
into. The main focus is the meeting
between the Federal Reserve and the United States Congress with the reasoning
behind the problems and their solutions. The main point of the meeting was to
inform everyone in that room that if they did not act now that the financial
system of this country will breakdown in a matter of days.
The problems all began in 2008
when a rumor was being discussed in Bear Sterns as the economy collapsed. There
was a fault in the stock market similar to the stock market crash in the 1930’s
and the stocks plummeted down. There was a mass effect upon American companies
where they were running out of money rapidly and some even on the edge of
filing for bankruptcy. Former Chairman of Bear Stearns, Ace Greenberg has been
questioned about the market because he was analytically incorrect which were
his rumors and hidden files which had cost his company 18 million dollars
within a month. Due to the foreclosures
rising in houses the mortgages that Bear Stearns bought and sold to investors
began to rapidly decline their value and stock.
Ace can be placed within a guidepost of the eight within economics. He possess
the economist value of the guidepost dealing with the test of a theory is the ability to predict because he analyzed
the economy and based a prediction off his own theory of the collapse.
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| Bear Stearns building in New York City |
In effect Bear Sterns stocks
quickly declined as did the company. The company was falling crumbling within
its own hold day by day and they were in a predicament between which paths to
take from where they stood as a Wall Street company. They knew that if they
went under that other Wall Street businesses would go under with them because
all of Wall Street is tied together with money and financials. Knowing so they
looked to Obama and the Federal Reserve Bank for a bail out to keep this from
happening. As a secondary effect of the Federal Reserve Bank bailout the price
of Bear Sterns stock dwindled to two dollars per stock which was unheard of
since the business has emerged.
Furthermore, our nation was in a
scare when we realized that any American business even those that were thought
never to go under did. It was when Fannie Mae and Freddie Mac stated this and
all of America began to panic. The Lehman Brothers was another business to
collapse during this financial crisis which was the turning point where it was
the worst financial crisis since the Great Depression. Next came AIG who did not have money in the bank to support
the commitments it made. The biggest
insurance company that did business with almost every bank in the world was now
controlled by the government after an 85 million dollar loan. The plan to end all disaster was a 700
billion dollar proposal to buy the entire toxic mortgage securities that was
causing problems for the banks. The
request was passed however the contagion went global. The U.S. intends to spend trillions of more
dollars to protect the financial systems in America. I believe this crisis is
going to continue worldwide because the rapid growth of technology and fraud
within our own systems will exist.
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