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The subprime mortgage crisis   
Fannie Mae & Freddie Mac   
The Crisis in Broker-Dealers   
AIG   
The savings and loan crisis   .

The financial crises we are repeatedly facing are inevitable results from the following: When you can borrow money at low rates and lend money at high rates you can make a lot of money; that's called arbitrage. If your borrowing is short term and your lending is long term, you might find yourself in the sad position of having depositers asking for their money but you've invested it in long term assets like real estate which are not liquid. When word gets out that you cannot repay deposits you get a "run on the bank". That's a dreadful crisis for which the fed is likely to make rescue. The compensation of business managers at all levels is heavily weighted to short term results. That means one can do very well when short term opportunities are good even though long term prospects are risky. It is up to stockholders and to regulators to make sure that this does not put financial businesses at risk. Business enterprise is a useful way to organize human beings for getting things done. But, this sure does focus a spotlight on the importance of business oversight and regulation. Whoever it is that says an unrestrained free market is golden is very foolish. Each of these financial crises has been preceeded by a time of giddy excess. Tom Blackburn put it well in his Palm Beach Post editorial of 9/15/08 with the simple phrase "private profits and public losses". Many writers are pointing out that if we are going to bail out business when it fails we need to regulate it to reduce the likelihood of failure. Business is often tempted to enjoy short term success without adequately seeing long term or public risk.

The subprime mortgage crisis

The crisis began with the bursting of the US housing bubble and high default rates on "subprime" and adjustable rate mortgages (ARM). Loan incentives, such as easy initial terms, in conjunction with an acceleration in rising housing prices encouraged borrowers to assume difficult mortgages on the belief they would be able to quickly refinance at more favorable terms. However, once housing prices started to drop moderately in 2006-2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically, as easy initial terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. Foreclosures accelerated in the United States in late 2006 and triggered a global financial crisis through 2007 and 2008. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity, up 79% from 2006.

The mortgage lenders that retained credit risk (the risk of payment default) were the first to be affected, as borrowers became unable or unwilling to make payments. Major banks and other financial institutions around the world have reported losses of approximately U.S. $435 billion as of 17 July 2008. Owing to a form of financial engineering called securitization, many mortgage lenders had passed the rights to the mortgage payments and related credit/default risk to third-party investors via mortgage-backed securities (MBS) and collateralized debt obligations (CDO). Corporate, individual and institutional investors holding MBS or CDO faced significant losses, as the value of the underlying mortgage assets declined. Stock markets in many countries declined significantly.

The widespread dispersion of credit risk and the unclear effect on financial institutions caused reduced lending activity and increased spreads on higher interest rates. Similarly, the ability of corporations to obtain funds through the issuance of commercial paper was affected. This aspect of the crisis is consistent with a credit crunch. The liquidity concerns drove central banks around the world to take action to provide funds to member banks to encourage lending to worthy borrowers and to restore faith in the commercial paper markets.
The above text was excerpted from Wikipedia:Subprime mortgage crisis

Fannie Mae & Freddie Mac

The Crisis in Broker-Dealers

AIG

The savings and loan crisis