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Fixing the Economy

By Kimberly Amadeo, About.com Guide to US Economy

What caused the 2008 credit and banking crisis, which caused the current recession, and what the government has been doing to fix it.

  1. Subprime Mortgage Crisis
  2. Banking Crisis
  3. Current U.S. Recession
  4. Obama's Economic Stimulus
  1. Important Terms
  2. Other Economic Crises
  3. Federal Toolbox

Subprime Mortgage Crisis

In 2006, the subprime mortgage crisis began, but experts said it would be restricted to the U.S. housing industry.

Banking Crisis

By August 2007, the Federal Reserve realized that banks were slowing down in lending. It began expansive monetary policies to add liquidity to the economy. What it didn't realize, though, was that the problem was one of credibility, since the banks had stopped lending because they didn't trust each other.

Current U.S. Recession

By Q4 2007, the U.S. GDP growth rate had turned negative. The U.S. was in a recession, but experts didn't realize it until Q3 2008, when growth turned negative again.

Obama's Economic Stimulus

Even before he took office, Barack Obama had a well-formulated plan to fix the economy. As time goes on, he and his team will be challenged to creatively address one of the worst economic crises in modern times.

Important Terms

The cause of the meltdown was deregulation of derivatives that were so complicated that even their originators didn't understand them. Find out what they are, how they work, and how they will continue to muck up the economy for years to come.

Other Economic Crises

The U.S. economy has suffered from many other economic crises. This gives us hope, because we learned more about how the economy works and became smarter about managing it. Without that knowledge, we would be in much worse shape today.

Federal Toolbox

TAARP, TALF, TAF - The Federal Government has created a whole new list of tools to fix the economy. Find out what they are and how they work.

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