Government intervention during the subprime mortgage crisis

In October 2008, the Swiss National Bank funded a reorganization of UBS that removed bad assets from its books, and later sold its equity stake at a profit.

Northern Rock had difficulty finding finance to keep the business going and approached the Bank of England as lender of the last resort on 12 September 2007.

[23] In order for the deal to go through J.P. Morgan Chase required[24] the Fed to issue a nonrecourse loan of $29 billion to Bear Stearns.

[26][27] The bailout was taken in part to avoid a potential fire sale of nearly U.S. $210 billion of Bear Stearns' MBS and other assets, which could have caused further devaluation in similar securities across the banking system.

[28][29] Chairman of the Fed, Ben Bernanke, defended the bailout by stating that a Bear Stearns' bankruptcy would have affected the real economy[30] and could have caused a "chaotic unwinding" of investments across the US markets.

Given their size and key role in the US housing market, it had long been speculated that the US Government would take action to bolster both companies in such a situation.

On 5 September 2008, the Treasury Department confirmed that both Fannie Mae and Freddie Mac would be placed into conservatorship[37] with the government taking over management of the pair.

Also on that day Lehman Brothers, facing a refusal by the federal government to bail it out, filed for Chapter 11 bankruptcy protection.

[11] Treasury Secretary Hank Paulson cited moral hazard as a reason for not bailing out Lehman Brothers.

The Federal Reserve required a 79.9 percent equity stake as a fee for service and to compensate for the risk of the loan to AIG.

On the previous day, 25 September 2008, the United States Office of Thrift Supervision (OTS) announced that it closed the holding company's primary operating subsidiary, Washington Mutual Savings Bank, and had placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC).

The FDIC sold the assets, all deposit accounts, and secured liabilities to JPMorgan Chase, but not unsecured debt or equity obligations.