Lehman Brothers and Government Intervention

The episode discusses the significant impact of Lehman Brothers' collapse, which led to its liquidation due to poor mortgage investments, highlighting the fragility of the financial system. In response to the crisis, the federal government intervened by providing an $85 billion loan to American International Group (AIG) to stabilize the economy. The hosts express concern over the Federal Reserve's seemingly passive approach during this tumultuous time, questioning its effectiveness in managing the crisis. Additionally, the government’s efforts to stabilize Fannie Mae and Freddie Mac underline the challenges faced by major financial institutions during the housing market collapse.