Panic

Author
John H. Makin
Content Type
Policy Brief
Institution
American Enterprise Institute for Public Policy Research
Abstract
The credit crisis that followed the collapse of the housing bubble turned into a financial panic on Wednesday, September 17, 2008. There was a run by households out of money-market funds and into safe Treasury bills, pushing their yields to zero for the first time since the Great Depression. There was a liquidity trap in the interbank market, in which banks that are supposed to lend to each other hoarded cash for fear of runs by their depositors and the insolvency of other banks. Financial markets simply froze in the midst of chaos.
Topic
Economics, Markets, Political Economy
Political Geography
Middle East