The 2008 market crash was nothing short of a catastrophe and will serve as a prime example of a “bubble” for many years to come. On September 29, 2008, the Dow Jones Industrial Average fell 777 points in a single day, the largest daily decline recorded up to that point in history. On the surface level, it collapsed because Congress rejected the bank bailout bill, but the tensions that actually caused the collapse had been building for many years. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay The Dow Jones industrial average opened 2007 at 12,459.54. It appreciated in parallel with strong concerns about the subprime mortgage crisis. On November 17, 2006, the U.S. Department of Commerce warned that the most recent new housing permits were approximately 28 percent lower than during the same time period in the same months last year. Most economists failed to see how big the problem would be, and were actually happy that the overinflated housing market was returning to “normal.” They failed to see how this decrease in purchases would affect the default settings. Falling home prices simultaneously triggered defaults on huge amounts of subprime mortgages. The Fed decided to add liquidity by purchasing banks' subprime mortgages. In October, economists raised major alarm bells about the overuse and danger of CDOs (Collateralized Debt Obligations, basically a collection of lackluster debts that had been bundled together and given inaccurate ratings) and derivatives. In November of that year, Treasury Secretary Hank Paulson sought to relieve some of this downward pressure by launching a so-called “Superfund” that would buy toxic bank debt. The idea was that by doing so the government would take on some of the risk that banks were facing and help banks out of an ever-deepening rabbit hole. At the end of the year, economists were actually very optimistic because our GDP had grown by 0.5% despite this potential crisis. The Dow ended the year in a great position and it seemed that the liquidity crisis had been conquered. Since 2008, the economy has lost 17,000 jobs, but the Dow has remained largely unchanged. The Dow fell sharply after the Bear Stearns bailout, but then took a hit after Lehman Brothers was forced to file for bankruptcy. The Fed then bailed out AIG, effectively taking ownership and frantically paying off credit default swaps against the failed MBS. On September 19, the Fed set up a $122 billion fund with banks to buy commercial paper from money markets to try to help pay off any maturing obligations. The next day, the bank bailout failed, sending the Dow tumbling 777 points. The effects were felt around the world. The price of oil collapsed, the price of gold rose, the FTSE in London fell by 15% and the MSCI World index fell by 6% in a single day. Congress eventually passed a bank bailout bill, but only after 159,000 jobs had been lost and many people had lost their jobs. they have completely lost faith in the American economy. On October 6, the Dow fell by 800 points (new record), falling below 10,000. It was undeniable that we were in a recession. Remember: this is just an example. Get a custom paper from our expert writers now. Get an essay.