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What ignited the financial crisis and how did the Fed respond to it?

June 2009

Those are two very broad questions!  However, we have just the place for you to go to answer those questions and more. Since you are visiting Dr. Econ, you’re almost there already!

The Federal Reserve Bank of San Francisco has a website, The Economy: Crisis & Response, where you will find information and analysis on what caused the financial crisis, what the Fed did in response, and what the road ahead might look like. We invite you to check the entire website or one of the three key topic areas described below!

The Financial Crisis: The financial market turmoil that began in 2007 led to a severe global economic downturn. Here you can find out about the cause of the crisis, the effects on global financial markets, and the spillover into the broader economy.

The Fed’s Response:  The Fed has taken aggressive steps using unprecedented strategies  to respond to the financial crisis. The Fed's actions to stabilize the financial system, respond to the recession, and address the safety and soundness of banking institutions are examined here.

The Road Ahead: As the economy moves toward recovery the Fed will remain active in its responses, including unwinding certain policies as conditions warrant. This section covers the current economic outlook, why inflation is a topic of focus, and the changes in regulation needed to strengthen the financial markets.