The extension of funds by the Treasury Department from the Troubled Asset Relief Program and of guarantees by the Federal Deposit Insurance Corporation (FDIC) from the Temporary Liquidity Guarantee Program to each of the nation’s largest institutions revealed the government’s conclusion in the fall of 2008 that a very real threat to the nation’s entire financial system was best addressed by shoring up the largest financial firms.
Regulatory reform: the consensus to date The crisis thus arose against the backdrop of a regulatory system that had not adjusted to the extensive integration of traditional lending with capital market activities, which had created new sources of systemic risk. The already significant too-big-to-fail problem was further amplified by the government’s actions in 2008 to prevent a complete collapse of the financial system.