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Save the banks
Toxic assets and bank run
Some financial institutions had their hands full of assets suddenly “toxic” (mortgage contracts bundled in financial products through the securitization process). These endangered institutions (investment banks, etc.) saw their customers (often other banks) withdraw their assets, bleeding these banks from any cash. It was a true bank run.
Credit Default Swaps: not central to the crisis
The CDS (Credit Default Swap) played a part in the 2008 crisis. Their role came at the end of the chain reaction. It doesn’t seem that the CDS were decisive in bursting the bubble. It was more about looking for a scapegoat.
Fed rescuing banks
The Federal Reserve Bank, as well as the US Treasury, started to prevent a meltdown of the financial system…
Could the Fed go broke?
No, unless the Congress decides to blow up the country by another financial crisis.