History 1810E Study Guide - Midterm Guide: Henry Paulson, Timothy Geithner, Commercial Bank
24 Oct 2015
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Started with the concept of the american dream , where normal american civilians got caught in the idea of the main goal in life is becoming a homeowner. Said to be the biggest american crisis since 911. People started living a life on a set narrative, conventional wisdom. This came especially true after the second world war when suburbia started to evolve. Government after the depression in the 20s made the glass steagall act in which commercial banks on main street had to be kept separate from business transactions from the investment banks on wall street. In order to make mortgages possible, and to free up the reserve requirements from commercial banks, the gov created fannie mae. Fannie only worked with safe mortgages and it was a win-win situation, where there was almost no risk being involved. To prevent a monopoly, the gov created freddie mac, so that fannie could have a competitor fannie did before.
