Describe the 2008 financial crisis as a modern-day bank run.

The 2008 financial crisis as a modern-day bank run
Name
Course
Instructor
Date
The 2008 financial crisis placed enormous pressure on the U.S. financial system following a sudden loss on the value of financial assets in investment banks and financial institutions dealing with mortgage- backed securities. The financial crisis led to the global recession, and the Federal Reserve’s efforts to bail out failing banking institutions put doubt on the strength of the U.S financial system. In any case, there was a gradual fall in house prices and rising unemployment while subsequent government intervention was seen as controversial. Republicans were against the government’s efforts to interfere with free markets, while the Democrats were against bailing out of elite Wall Street financiers. This paper describes the 2008 financial crisis as a modern day bank run.
The 2008 financial crisis caused a shock to the financial sector, and beginning with the failure of the Lehman Brothers led to panic among consumers, bank depositors and investors. The events were like a bank run on financial markets especially the Repo market where there was no insurance guarantee. Various financial institutions suffered simultaneously, to the extent that various banks suffered insolvency because the value of their assets declined dramatically, after proper assessment that they were mostly holding toxic assets. Even though, the major banks were the ones mostly affected, most depositors rushed to withdraw money because of the assumption that other banks would also be insolvent.
The 2008 financial crisis is akin to a modern-day bank run where depositors lose confidence in the banking system and withdraw large sums of money. According to Stewart (2009), AIG was a major player in the insurance sector dealing with mortgage backed securities offering securities through 500 million credit swap. The guarantees made it difficult to pay the huge amount and honor contracts, because many banks had uninsured and unhedged financi...