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The '''Financial Crisis of 2008''' is an ongoing global financial crisis that is the worst the world has seen since 1933 with the [[Great Depression]]. Drastic measures to confront seemingly insurmountable financial calamity resulted in the creation of '''TARP''' (Troubled Assets Relief Program), $700 billion safety net [[appropriation|appropriated]] by the U.S. Congress.  The National Bureau of Economic Research<ref>NBER is a private organization that follows its own standards as set by eminent economists such as [[Milton Friedman]]; its dating of business cycles is widely accepted by conservatives.</ref> has identified the peak of the last boom cycle in December 2007; the U.S. economy has been in decline ever since.<ref>See "Text of the NBER's statement on the recession and FAQ's" [http://www.usatoday.com/money/economy/2008-12-01-recession-nber-statement_N.htm ''USA Today'' Dec 1, 2008]. "The U.S. economy entered a recession in December 2007, a committee of economists at the private National Bureau of Economic Research said," at [http://www.marketwatch.com/news/story/US-recession-began-December-2007/story.aspx?guid={7DCF90E4-D61A-4014-83CE-45E938CD632C} Rex Nutting] - MarketWatch</ref>  [[Image:CRASH08.JPG|thumb|330px|Oct 11, 2008 editorial; cartoon by Horsey stresses the global collapse]]  The crisis has caused the [[Recession of 2008]], which reached bottom in summer 2009, causing a worldwide economic decline that is the most severe since the 1930s. As of 2013, there are still 4 million fewer jobs in the U.S. than in 2008 - despite $5 trillion in federal [[stimulus]] spending.   

The '''Financial Crisis of 2008''' is an ongoing global financial crisis that is the worst the world has seen since 1933 with the [[Great Depression]]. Drastic measures to confront seemingly insurmountable financial calamity resulted in the creation of '''TARP''' (Troubled Assets Relief Program), $700 billion safety net [[appropriation|appropriated]] by the U.S. Congress.  The National Bureau of Economic Research<ref>NBER is a private organization that follows its own standards as set by eminent economists such as [[Milton Friedman]]; its dating of business cycles is widely accepted by conservatives.</ref> has identified the peak of the last boom cycle in December 2007; the U.S. economy has been in decline ever since.<ref>See "Text of the NBER's statement on the recession and FAQ's" [http://www.usatoday.com/money/economy/2008-12-01-recession-nber-statement_N.htm ''USA Today'' Dec 1, 2008]. "The U.S. economy entered a recession in December 2007, a committee of economists at the private National Bureau of Economic Research said," at [http://www.marketwatch.com/news/story/US-recession-began-December-2007/story.aspx?guid={7DCF90E4-D61A-4014-83CE-45E938CD632C} Rex Nutting] - MarketWatch</ref>  [[Image:CRASH08.JPG|thumb|330px|Oct 11, 2008 editorial; cartoon by Horsey stresses the global collapse]]  The crisis has caused the [[Recession of 2008]], which reached bottom in summer 2009, causing a worldwide economic decline that is the most severe since the 1930s. As of 2013, there are still 4 million fewer jobs in the U.S. than in 2008 - despite $5 trillion in federal [[stimulus]] spending.   

Some [[free market]] advocates believe Congress and the [[Federal Reserve]] should not have bailed out failing firms and instead should have allowed market mechanism to operate.<ref>Free market advocates assert successful enterprises should be rewarded for doing things right, and failing businesses should be allowed to perish for making mistakes and not providing the public with the things they need or are in demand; government intervention can drag out recessions and depressions). [http://www.youtube.com/watch?v=zzTXaAXusiI]</ref><ref>http://www.youtube.com/watch?v=czcUmnsprQI</ref>  A 2005 study found that government corporate bailouts are often done  more for political considerations, and the economic resources allocated exhibit significantly worse  performance than resources allocated using practical considerations <ref>http://papers.ssrn.com/sol3/papers.cfm?abstract_id=676905</ref>

Some [[free market]] advocates believe Congress and the [[Federal Reserve]] should not have bailed out failing firms and instead should have allowed market mechanism to operate.<ref>Free market advocates assert successful enterprises should be rewarded for doing things right, and failing businesses should be allowed to perish for making mistakes and not providing the public with the things they need or are in demand; government intervention can drag out recessions and depressions. [http://www.youtube.com/watch?v=zzTXaAXusiI]</ref><ref>http://www.youtube.com/watch?v=czcUmnsprQI</ref>  A 2005 study found that government corporate bailouts are often done  more for political considerations, and the economic resources allocated exhibit significantly worse  performance than resources allocated using practical considerations <ref>http://papers.ssrn.com/sol3/papers.cfm?abstract_id=676905</ref>

The [[International Monetary Fund]] (IMF) calculated that the global financial crisis would produce $3.4 trillion in losses for financial institutions around the world by 2010.<ref>Peter Dattels and Laura Kodres, "Global Financial System Shows Signs of Recovery, IMF Says," [http://www.imf.org/external/pubs/ft/survey/so/2009/RES093009A.htm ''IMF Survey Magazine'' Sept. 30, 2009]</ref> World [[GDP]] in 2007 was approximately $70 trillion, so the immediate decline in the economic output of the planet was about 5%.

The [[International Monetary Fund]] (IMF) calculated that the global financial crisis would produce $3.4 trillion in losses for financial institutions around the world by 2010.<ref>Peter Dattels and Laura Kodres, "Global Financial System Shows Signs of Recovery, IMF Says," [http://www.imf.org/external/pubs/ft/survey/so/2009/RES093009A.htm ''IMF Survey Magazine'' Sept. 30, 2009]</ref> World [[GDP]] in 2007 was approximately $70 trillion, so the immediate decline in the economic output of the planet was about 5%.

Multiple crises started pulling down major financial players.  Countrywide, which originated 20% of all American mortgages in 2006, collapsed and was bought up by Bank of America.  Bear Stearns, a large investment bank, went under; the government arranged a sale to JPMorgan Chase; stock holders lost about 90% of their investment, and the confidence in other banks was undermined.

Multiple crises started pulling down major financial players.  Countrywide, which originated 20% of all American mortgages in 2006, collapsed and was bought up by Bank of America.  Bear Stearns, a large investment bank, went under; the government arranged a sale to JPMorgan Chase; stock holders lost about 90% of their investment, and the confidence in other banks was undermined.

On September 7, 2008, the government took control of the two largest mortgage holders, "[[Fannie Mae]]"<ref>Federal National Mortgage Association (FNMA)</ref> and "[[Freddie Mac]]".<ref>Federal Home Loan Mortgage Corporation (FHLMC)</ref> The two had lost $15 billion on the $5.4 trillion in mortgages they owned, and their notes were widely held in [[China]] and many other countries.  The fear was that if the Treasury did not act the world's confidence in the US financial system would collapse.  However the rest of the world was in trouble too.  The stock markets in China and [[Russia]] plunged 50%, and the [[United Kingdom|British]] Treasury had to take over its largest mortgage company, [[Northern Rock]].  Vast sums of money flowed into the US because it was safer there than anywhere else.

On September 7, 2008, the government took control of the two largest mortgage holders, "Fannie Mae"<ref>Federal National Mortgage Association (FNMA)</ref> and "[[Freddie Mac]]".<ref>Federal Home Loan Mortgage Corporation (FHLMC)</ref> The two had lost $15 billion on the $5.4 trillion in mortgages they owned, and their notes were widely held in [[China]] and many other countries.  The fear was that if the Treasury did not act the world's confidence in the US financial system would collapse.  However the rest of the world was in trouble too.  The stock markets in China and [[Russia]] plunged 50%, and the [[United Kingdom|British]] Treasury had to take over its largest mortgage company, [[Northern Rock]].  Vast sums of money flowed into the US because it was safer there than anywhere else.

[[Image:PANIC08.jpg|thumb|300px|Panic in Wall Street, Sept. 2008; the "bull" is the symbol of optimism on Wall Street and the "bear" is the symbol of pessimism.  Here the bull panics.]]

[[Image:PANIC08.jpg|thumb|300px|Panic in Wall Street, Sept. 2008; the "bull" is the symbol of optimism on Wall Street and the "bear" is the symbol of pessimism.  Here the bull panics.]]

By September the major banks were no longer lending money and most reported huge losses as they wrote down the value of the CDOs and other assets. Short sellers sold large amounts of stock in threatened companies, causing further panic and driving down share prices.<ref>The short sellers did not own the shares; the practice was stopped on Sept. 19, 2008, by the [[Securities and Exchange Commission]] because it destabilized markets.</ref> [[Lehman Brothers]], one of the oldest and largest banks in New York, went bankrupt on Sept. 15 with no one to rescue it.  The collapse of Lehman with its $639 billion in assets had a multiplier effect worldwide, severely weakening other big banks and sharply increasing the level of fear and distrust inside the system that caused bankers to sharply reduce their lending.  Many large firms and hedge funds had borrowed billions of dollars from lenders and had pledged assets they owned as collateral. When the value of their collateral plummeted, the lenders demanded more collateral to make up the difference, so the borrowers had to sell assets to raise emergency cash.  The price of the assets they sold was falling, and large additional sales further depressed prices, creating a downward spiral.  

By September the major banks were no longer lending money and most reported huge losses as they wrote down the value of the CDOs and other assets. Short sellers sold large amounts of stock in threatened companies, causing further panic and driving down share prices.<ref>The short sellers did not own the shares; the practice was stopped on Sept. 19, 2008, by the [[Securities and Exchange Commission]] because it destabilized markets.</ref> [[Lehman Brothers]], one of the oldest and largest banks in New York, went bankrupt on Sept. 15 with no one to rescue it.  The collapse of Lehman with its $639 billion in assets had a multiplier effect worldwide, severely weakening other big banks and sharply increasing the level of fear and distrust inside the system that caused bankers to sharply reduce their lending.  Many large firms and hedge funds had borrowed billions of dollars from lenders and had pledged assets they owned as collateral. When the value of their collateral plummeted, the lenders demanded more collateral to make up the difference, so the borrowers had to sell assets to raise emergency cash.  The price of the assets they sold was falling, and large additional sales further depressed prices, creating a downward spiral.