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Answer: Fannie Mae and Freddie Mac were nationalized by the US government.
**Correct Answer: A** **Explanation:** A is correct. The peak of the subprime crisis came in the fall of 2008, which saw a cascade of events, including the two mortgage agencies Fannie Mae and Freddie Mac being nationalized. B is incorrect. The collapse of Long-Term Capital Management occurred in 1998 and was not related to the subprime mortgage crisis. C is incorrect. On September 15, 2008, Lehman Brothers filed for bankruptcy, after attempts to organize an industry rescue or to sell the firm to another large bank ultimately failed. D is incorrect. Morgan Stanley and Goldman Sachs, not Citigroup, were converted to bank holding companies during this time.
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A risk manager at a financial institution is preparing a webinar presentation on the topic of the great financial crisis of 2007–2009. The manager wants to include a description of several market events that occurred involving large financial institutions during the subprime mortgage crisis. Which of the following events happened during the peak of the subprime crisis?
A
Fannie Mae and Freddie Mac were nationalized by the US government.
B
Long-Term Capital Management (LTCM) was acquired by a consortium of banks after losing most of its capital.
C
A large financial institution purchased part of Lehman Brothers and thereby prevented Lehman from being forced to file for bankruptcy.
D
Citigroup was converted to a bank holding company and became regulated by the Federal Reserve.