February 3 . Federal Reserve Chairman Ben S. Bernanke begins second term. February 2. Greece's prime minister, George Papandreou, makes appeal for unity over its worst financial crisis in decades. The European Commission endorses a fiscal rescue plan. January 27. President Obama pledged to divert $30 billion of money repaid from the Troubled Asset Relief Program to smaller banks to help them make loans to small businesses. January 21 . President Obama proposed that a single bank be allowed to hold no more than 10% of total bank deposits and that banks no longer be allowed to operate hedge funds and private equity funds and to make riskier investments to reap a quick reward. December 30. IHS Global Insight released its top-10 Global Economic Predictions for 2010: (1) The U.S. recovery will start slowly. (2) Europe and Japan will rebound even more slowly than the United States. (3) Most emerging markets—especially in Asia—will outpace the developed economies. (4) Interest rates will remain low—especially in the G7. (5) Fiscal stimulus will begin to ease. (6) Commodity prices will move sideways. (7) Inflation will (mostly) not be a problem. (8) After improving for a while, global imbalances will worsen again. (9) While the dollar may strengthen a little, it is on a downward path. (10) The risk of a double-dip growth profile is still uncomfortably high. December 14 . Abu Dhabi provided Dubai with an infusion of $10 billion that will enable Dubai to pay $4.1 billion to bondholders as well as bills from suppliers and contractors. December 3 . European Central Bank President Jean-Claude Trichet signaled that the bank's planned withdrawal of stimulus measures would proceed gradually. November 14. Eurostat announced that the Euro Zone had officially emerged from recession during the third quarter 2009. The rebound was powered by Germany. November 10 . Senate Banking Committee Chairman Christopher Dodd released a draft of a financial regulation bill. September 24-25. At the Group of 20 Summit held in Pittsburgh, world leaders agreed to make the G-20 the leading forum for coordinating global economic policy; not to withdraw stimulus measures until a durable recovery is in place; to co-ordinate their exit strategies from the stimulus measures; to harmonize macroeconomic policies to avoid imbalances (America's deficits and Asia's savings glut) that worsened the financial crisis; and to eliminate subsidies on fossil fuels (only in the medium term). In trade, there was only a weak commitment to get the Doha round of multilateral trade negotiations at the World Trade Organizations back on track by 2010, and for the International Monetary Fund, the leaders pledged to provide the "under-represented" mostly developing countries at least 5% more of the voting rights by 2011. The other large institutional change was the ascension of the Financial Stability Board, a group of central bankers and financial regulators, to take a lead role in coordinating and monitoring tougher financial regulations and serve, along with the International Monetary Fund, as an early-warning system for emerging risks. Policymaking to deal with the global financial crisis and ensuing global recession has now moved from containing the contagion to specific actions aimed at promoting recovery and changing regulations to prevent a reoccurrence of the problem. Other issues, such as health care and the war in Afghanistan, also are competing for attention. Some have expressed concern that the improving economic and financial outlook may cause regulatory reform of the financial system to lose some traction in the crowded policy agenda. This report provides an overview of the global aspects of the financial crisis, how it developed, proposals for regulatory change, and a review of how the crisis is affecting other regions of the world. According to Global Insight, an econometric forecasting firm, the global financial crisis, or Great Recession of 2007-2009, can now be viewed as a once-in-a-century disaster with more or less unique features. Super-aggressive liquidity injections and reflationary actions during the fourth quarter of 2008 and the early months of 2009 helped stabilize the situation. The global economy's rebound gathered considerable steam during the second half of 2009, when world GDP (gross domestic product) growth accelerated to well above 3.0%, from 1.7% in the second quarter, after having contracted at an alarming pace of 6.5% in the first quarter. Global Insight expects world GDP to be at a below-trend pace of about 2.8% in 2010, after having contracted by 2.0% in 2009 with the economies of Greater China and the United States leading the recovery. The role for Congress in this financial crisis is multifaceted. The overall issue seems to be how to ensure the smooth and efficient functioning of financial markets to promote the general well-being of the country while protecting taxpayer interests and facilitating business operations without creating a moral hazard. The reality, however, is that financial interests are well entrenched, and the existing patchwork system of regulation (or non-regulation) has evolved over the past century largely in response to particular problems. If the United States were to "start from scratch" in designing an optimal regulatory system, it likely would not select the one it has, but making dramatic changes to the existing system invariably will result in someone's "ox being gored" and substantial bureaucratic inertia and lobbying activity. Congress also has a role to play in preventing future crises through legislative, oversight, and domestic regulatory functions. In addition, Congress has been providing funds and ground rules for economic stabilization and rescue packages and informing the public through hearings and other means. Congress also plays a role in measures to reform the international financial system, in recapitalizing international financial institutions, such as the International Monetary Fund, in replenishing funds for poverty reduction arms of the World Bank (International Development Association) and regional development banks, and in providing economic and humanitarian assistance to countries in need. The current crisis began as a bursting of the U.S. housing market bubble and a rise in foreclosures. As it ballooned into a global financial and economic crisis, some of the largest and most venerable banks, investment houses, and insurance companies have either declared bankruptcy or have had to be rescued financially. In October 2008, after the bankruptcy of Lehman Brothers, credit flows froze, lender confidence dropped, and one after another the economies of countries around the world dipped toward recession. The crisis exposed fundamental weaknesses in financial systems worldwide, and despite coordinated easing of monetary policy by governments, trillions of dollars in intervention by central banks and governments, and large fiscal stimulus packages, recovery appears to be just beginning. This financial crisis which began in industrialized countries quickly spread to emerging market and developing economies. Investors pulled capital from countries, even those with small levels of perceived risk, and caused values of stocks and domestic currencies to plunge. Also, slumping exports and commodity prices have added to the woes and pushed economies world wide either into recession or into a period of slower economic growth. For the United States, the financial turmoil touches on the fundamental national interest of protecting the economic security of Americans. It also is affecting the United States in achieving national foreign policy goals, such as maintaining political stability and cooperative relations with other nations and supporting a financial infrastructure that allows for the efficient functioning of the international economy. Reverberations from the financial crisis, moreover, are not only being felt on Wall Street and Main Street but are being manifest in world flows of exports and imports, rates of growth and unemployment, government revenues and expenditures, and in political risk in some countries. The simultaneous slowdown in economic activity around the globe indicates that emerging market and developing economies have not decoupled from industrialized countries and governments cannot depend on exports to pull them out of these recessionary conditions. This global financial and economic crisis has brought to the public consciousness several arcane financial terms usually confined to the domain of regulators and Wall Street investors. These terms lie at the heart of both understanding and resolving this financial crisis and include: Systemic risk ("Too big to fail"): The risk that the failure of one or a set of market participants, such as core banks, will reverberate through a financial system and cause severe problems for participants in other sectors. Because of systemic risk, the scope of regulatory agencies may have to be expanded to cover a wider range of institutions and markets. Deleveraging: The unwinding of debt. Companies borrow to buy assets that increase their growth potential or increase returns on investments. Deleveraging lowers the risk of default on debt and mitigates losses, but if it is done by selling assets at a discount, it may depress security and asset prices and lead to large losses. Hedge funds tend to be highly leveraged. Procyclicality: The tendency for market players to take actions over a business cycle that increase the boom-and-bust effects, e.g. borrowing extensively during upturns and deleveraging during downturns. Changing regulations to dampen procyclical effects would be extremely challenging. Preferred equity: A cross between common stock and debt. It gives the holder a claim, prior to that of common stockholders, on earnings and on assets in the event of liquidation. Most preferred stock pays a fixed dividend. As a result of the stress tests in early 2009, some banks may increase their capital base by converting preferred equity to common stock. Collateralized debt obligations (CDOs): a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets. CDOs based on sub-prime mortgages have been at the heart of the global financial crisis. CDOs are assigned different risk classes or tranches, with "senior" tranches considered to be the safest.