The Great Depression Of The 1930 S - 2417 Words

â…   - Introduction In 2008 the world experienced one of the largest economic crisis, next to the great depression of the 1930’s. The meltdown revealed the instability of the US banking system and led to the bankruptcy of investment firm Leimen brothers, and collapse of worlds largest insurance company AIG, which triggered a global financial crisis. International share prices tumbled, causing 30 million people to become unemployed and doubling the US debt. It was the start of a global recession and it was not an accident. â… ¡ - History After the great depression the US went 40 consecutive years without any financial crisis. All US banks were tightly regulated; investment firms and banks were privately owned. In investment firms, the†¦show more content†¦The more stocks an investor sold, the higher the bonus or commission. The salaries on wall street tripled. In 1981 president Ronald Regan, supported by lobbyists and analysts, started a 30 year period of deregulation. In 1982 the Regan party deregulated savings and loan companies which allowed them to make risky investments with depositors money. In the late 1990’s the creation of derivatives occurred, which actually just increased the markets instability. Derivatives allow brokers to gamble on virtually anything, such as the rise and fall of oil prices. By the late 1990 deviates was a 50 trillion dollar unregulated market. Now, lenders are no longer at risk if there is a failure to repay. In the new system, lenders issue loans. These loans are then sold to investment banks. The investment banks compile thousands of different loans together, such as student loans, mortgages and credit payments together to form complex derivatives called CDO’s (Collateralized debt obligations). Investment banks then sell these CDO’s to investors. These CDO’s are classified by ratings company on the risk of investing into them. The highest rating is AAA (lowest risk, highly securitized). Investment companies were rating extremely risky investments as AAA but held no responsibility if the CDO failed, because they claimed that their classification and rating system was just opinions. â… ¢ - Housing Market... (The graph above displays years 1994-2006,