The 2007-2008 financial crisis led to significant federal action to save banks and boost confidence in the finance sector, primarily due to the failure of mortgage-backed securities and the housing market collapse. This situation caused widespread distrust in the financial markets, leading to a freeze in credit access. To combat this, the U.S. government passed the Emergency Economic Stabilization Act of 2008, introducing the Troubled Asset Relief Program (TARP) to purchase toxic assets from companies and inject capital into banks, eventually turning a profit from these interventions. Additionally, the crisis affected Fannie Mae and Freddie Mac, leading to government conservatorship and financial support, and major institutions like Bear Stearns and AIG received significant federal aid to prevent their collapse, with the government managing to recoup its investments with interest.
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