Abstract
Although the financial meltdown of 2008 can be tied to the collapse of the mortgage industry due to sub-prime mortgages and mortgage backed securities, it rapidly became a worldwide crisis. The decisions that were made and implemented to try to provide stability in the economy and prevent disruption in the financial system failed miserably and led to the worst economic recession since 1929. This paper will take a look at the weeks of financial turmoil that shook the world’s financial system.

America’s falling dollar and mounting international debt are not, as pundits often declare, the wages of profligacy and sin. They are the inevitable products of dysfunctional international financial arrangements – a system that now appears likely to come crashing down, with alarming implications for the American economy. (Aliber 1) This is a very prophetic statement in an article written in 2005 by Dr. Robert Aliber. Dr. Aliber is a Professor Emeritus of International Economics and Finance at the University of Chicago and is widely known for his theory of foreign direct investment.
The credit crisis that shook the world’s financial system, which long ago moved beyond its origins in subprime mortgages, began to accelerate in September, 2008. On September 7, 2008, the US Treasury seized control of mortgage giants Fannie Mae and Freddie Mac and pledged a $200 billion cash injection to help the companies cope with mortgage default losses. Although privately owned, Fannie Mae and Freddie Mac are called Government Sponsored Entities or GSEs. Under the bailout, the two GSEs were placed under a “Conservatorship” status (Agrawal 1) and both continued working as before but their commitments were to be paid with the support of the US Treasury.
From September 14 – 22, 2008, we saw the collapse of investment bank giants. An investment bank (i-bank) is nothing like