January 19, 2010
The Bailout in 2009
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Fifteen months after the adoption of the EESA (the “Bailout Bill”), twenty-one months after Federal Reserve’s rescue of Bear Stearns, and twenty-eight months after the crisis in the mortgage market became a broader credit crisis, the Federal government is still trying to come to grips with the fallout. The government is in the process of winding down some of the steps taken to alleviate the worst of the 2008 credit crisis, but is still looking at ways to address the larger issues. The Administration and the Federal Reserve are still implementing the blizzard of programs adopted following the enactment of EESA. The FDIC is continuing to resolve troubled banks, other than the largest banks. The Federal Reserve continues to maintain near-zero interest rates, in part to assist banks in earning their way out of the losses incurred due to the bursting of the housing bubble and subsequent recession. And Congress, the courts and the regulators are looking at reforms to reduce the risk of another crisis of this magnitude.
This report will look at five aspects of the government's ongoing efforts to address the fallout from the credit crisis. First, we will review the "bailout" itself -- the programs launched in the fall of 2008 to preserve financial institutions and other entities that might otherwise have failed. Second, we will look at the bank resolution process, and how it is playing out in the current cycle. Third, we will look at the government's efforts to mitigate the effects of the collapse of the housing bubble, the initial cause of the crisis. Fourth, we will examine the efforts of the government (primarily the Federal Reserve) to intervene in the capital markets to contain the effects of the credit crisis. Finally, we will review the current state of reform initiatives, in Congress, the regulatory agencies, and the courts.
This report will summarize developments in the bailout effort over the last nine months, and examine the proposed reforms currently making their way through the process.
Read our previous articles on the bailout:
The Bailout in Transition
April 2, 2009
The Bailout Revisited
December 17, 2008
The Shape of the Bailout
October 29, 2008
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©2010 Dorsey & Whitney LLP. This article is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances. An attorney-client relationship is not created or continued by reading this article. Members of the Dorsey & Whitney LLP group issuing this communication will be pleased to provide further information regarding the matters discussed therein.