Global Financial Crisis: What Should the US Show the World?

Abstract

Over the past month, the U.S. and the world have watched unfold the biggest crisis since the Great Depression–a crisis that could change the landscape of the U.S. financial and economic system. The housing bubble burst, the stock market tumbled, and a swath of banks went bankrupt and were merged into others. The government bailed out Fannie Mae and Freddie Mac, the two mortgage giants; AIG, the nation’s biggest insurer; and some banks. The rescue plan struggled and was initially rejected in the Congress before it was finally passed. Still the market slump continues, financial markets are frozen, the credit crunch has begun to hurt the real economy, pessimistic predictions about the future prevail, and panic spreads over the whole society. Moreover, the crisis has spilled over to the EU, Asia, and around the world. Naturally, pundits are looking for culprits to blame for the shambles of the U.S. financial markets.