This is the VOA Special English Economics Report.
week, we continue our look back at the major economic stories of the year. On
September fifteenth, Lehman Brothers, a one hundred fifty-eight year-old
investment bank, sought legal protection from its creditors. It had failed to find a buyer after months of
With over six hundred billion dollars in debt, Lehman's
failure was the largest bankruptcy in United States history. At the
same time, the nation's biggest insurance company, American International Group,
had gotten into trouble selling credit default swaps. These are contracts similar to insurance that
protect the holder against credit risk.
rating agencies downgraded A.I.G. because of concerns it could not honor its
contracts. Unable to get new loans,
A.I.G. asked for government help. The
Federal Reserve agreed to loan A.I.G. eighty-five billion dollars in return for
eighty percent of the company. But it
was not enough. By November, the
government had extended a total of about one hundred fifty billion dollars in
aid to A.I.G — the most to any single company during the crisis.
As banks refused
to lend, Treasury Secretary Henry Paulson proposed a plan to loosen credit
markets by buying risky assets. Congress approved the Emergency Economic
Stabilization Act of Two Thousand Eight on October third. The bill provided seven hundred billion
dollars to buy hard-to-value securities from banks.
But within weeks, the government
changed plans. The Treasury moved to invest
two hundred fifty billion dollars directly in banks to help them lend money
Lack of credit not only hurt banks but manufacturers,
too. Falling car sales threatened
America's carmakers. The big three
automakers -- General Motors, Ford and Chrysler -- told Congress that they
needed loans or they faced bankruptcy. In
December, President Bush offered G.M. and Chrysler over seventeen billion
dollars in loans.
As the year ended, the
Federal Reserve tried to support economic growth by lowering its main interest
rate to nearly zero for the first time.
But there was one more bad surprise. New York money manager Bernard
Madoff admitted he had cheated investors out of fifty billion dollars. The news only added to the sense that two
thousand eight was the worst economic year
since the nineteen thirties.
And that's the VOA Special
English Economics Report, written by Mario Ritter. I'm Steve Ember.