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CHAPTER 10 Resurrection, Recovery, and Reform (2008 to 2014)

Returning to Charts 9.1, 9.2, and 9.3, we’ll now cover the recovery after 2008 and discuss what remains to be done. Again using references to the numbers on Chart 9.1, we now look at a few of the key events that occurred during the period of recovery and how those affected credit spreads.

BERNANKE SPEECH IN DC (CHART 9.1, EVENT 21)

The fact that the United States and the world somehow made it through 2008 intact is largely the result of the actions taken by the Federal Reserve. As we have discussed, the Treasury under Secretary Paulson was a source of instability and uncertainty during this period, although he now appears to take credit for saving the world. In fact the lion’s share of the credit belongs to the members of the Federal Reserve Board and the thousands of regulators, lawyers, and financial professionals who labored long to save the global financial system. Mistakes were made. Some were unwound and others have been left unresolved for future crisis resolutions.

The following year was also difficult, for a variety of reasons. First and foremost, the peak losses for U.S. banks came during 2009 along with increasing revelations about the scope and magnitude of losses to be taken by investors in all types of securities. It would take several more years before a true picture of the damage done by the latest cycle of fraud on Wall Street was assembled.

Another source of instability came amidst continued questions ...