Crises in the financial industry have threatened the quality of life in the United States several times throughout the 20th and 21st century. Warnings of a Great Depression surrounded the collapse of the banking industry in the late 1980s, known as the Savings & Loan Debacle, and the Global Financial Crisis of 2008. Sectors of the economy have, also, been labeled as potential ground zero for a large-scale failure that could destroy the economy. Primary and secondary sources detailing the crises and potential crises that almost have and could bankrupt the country are contained in this section.
Savings & Loan Debacle
At the time, the federal bailout of the Savings & Loan industry in 1989 was the largest in U.S. history. $160 billion of taxpayer money was allocated to stave off the economic calamity threatened by the large-scale failure of Savings & Loan institutions—a cost that was estimated to have cost taxpayers $519 billion by the end of the 1990s. Legislation that increased the investment powers of thrifts backed by a federal guarantee, fraudulent and dangerous banking practices and regulatory failures exacerbated by political interference converged to cause the S&L debacle. Primary and secondary documents detailing the causes and consequences of the S&L debacle are contained in this section. [Read More…]
Global Financial Crisis
It began in the United States with massive defaults on high-risk mortgage loans to borrowers with low credit ratings. It snowballed into a global credit crisis that bankrupted the nations of Latvia, Belgium and Iceland and brought the European Union to the brink of collapse. Efforts to prevent the total economic collapse promised by the Global Financial Crisis broke all previous records for federal bailouts—the cost to the United States alone is estimated to have reached $12.8 trillion. The causes of the Global Financial Crisis have been traced back to fraudulent lending practices, regulatory failures, and a securitization process that transferred the risks of bad loans to the global community. Primary and secondary documents detailing the factors that contributed to Global Financial Crisis and the government bailouts that offset global economic collapse are contained in this section. [Read More…]
Student Loan Debt Crisis
The student loan debt crisis has been identified as the United State’s next large-scale economic crisis. With federally guaranteed student loans topping $1 trillion and privately held student loans swelling to $165 billion in 2013, student loans are currently second only to mortgages as the largest source of consumer debt. 7 million of the 40 million Americans burdened with student loan debt have already defaulted on their loans—high unemployment rates and a stagnant U.S. economy are an indication that there are more defaults to come. Despite this, securities backed by student loans are all the rage on Wall Street. $5.6 billion in student loan backed securities were sold in 2013 with a strong demand for more. The factors evident in all great financial catastrophes—most notably risky lending practices spurred on by federal guarantees—are contained in the student loan market. Primary and secondary documents detailing the student loan market and the debt crisis that has all the makings of an economic meltdown are contained in this section. [Read More…]