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During the summer and fall of 2008, the U.S. financial system and financial systems around the...

During the summer and fall of 2008, the U.S. financial system and financial systems around the world appeared to be on the verge of collapse. How did we get into this condition? What did we do to get out of it? How can we prevent another such scenario in the future?​

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Answer #1

During 2008, lehman brothers filed bankrupcy. Lehman brothers was fourth largest US investment bank at that time. The reason for downfall was excessive lending to other financial institutions which had liberal rules regardin loan disbursement. For example if MR A is unable to get loan from Lehman  brothers he will simply take loan from other financial institution who had got loan from  Lehman brothers.

Thus strick credit norms are very essential to prevent such situation in future

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