Low interest rates encouraged borrowing and thus there was an increase in demand for various types of financial assets, leading to an increase in the prices of these assets while interest rates are lowered. This led to the deflation of the real estate bubble. The low rates have been exacerbated by modern financial instruments, such as collateralized debt obligations (CDOs) and MBS. The Federal Reserve responded to the crisis by lowering the key federal funds rate in order to provide extra liquidity to the financial system, offering direct lines of credit to a wider variety of financial institutions, and broadening the range of collateral it would be willing to agree to . in exchange for loans. These actions taken by the Fed helped the financial system maintain confidence and liquidity, as a measure to mitigate the effects of the financial crisis (Claessens, Valencia, Kose, Claessens & Laeven, M. (2011). The government also provided aid directed to several major financial companies. Treasury promised to add $100 billion to the agencies to provide short-term liquidity, support positive growth and, if they needed it, obtain mortgage securities on the open market. stability of the financial markets. The solutions to the crisis were short-term as they only served to minimize the crisis in