BEHIND THE NUMBERS
You put your savings in a deposit account in a bank of your choice, probably for convenience because it is close to home or work. Suddenly a banking crisis breaks out and the bank that held your deposit goes under and makes national headlines. What would be the first thought to cross your mind? Will my money be saved? Will the government step in to help? Why didn't anyone warn me that my bank would fail while the others would stay afloat? Unfortunately, some of these questions and their answers will have to change _ in a radical way.
A series of unfortunate events: In 2008, the US government bailed out two giant mortgage lenders, Fannie Mae and Freddie Mac, and later took control of American International Group (AIG) after the sub-prime debacle. In the same year, the British government rescued one of the UK's largest mortgage lenders, Northern Rock, along with Lloyds Banking Group and Royal Bank of Scotland Group.
Traditionally, when a large organisation is in trouble, especially one with great importance to the economy, the national government will step in. For instance, back in the late 1970s the American automobile industry had serious financial problems. One of the Big Three applied for federal assistance, and the US Congress subsequently passed the Chrysler Corporation Loan Guarantee Act of 1979. It provided US$1.5 billion worth of loan guarantees that the company then used to borrow $1.2 billion to finance its operations.
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