Deregulation was one of the causes of the 2008 financial crisis. Mortgage-backed securities are derivatives based on mortgages. Another financial invention, credit default swaps, help ensure their security. All of these were traded on the secondary market until 2006. In 2006, house prices began to decline. No one was knowledgeable enough to value mortgage-backed securities when the underlying mortgages began to default. Due to the high number of defaults, businesses that guaranteed the debt, such as American International Group Inc. (AIG), ran out of money.

Wall Street responded to stock market crashes by using financial support measures, stricter regulations, and improved trading systems. In major downturns like the 1929 crash, the 1987 market collapse, and the 2008 financial crisis, governments and financial institutions worked together to calm investors and stabilize the economy. The Federal Reserve played a major role by reducing interest rates, supplying emergency funds to banks, and encouraging economic activity.

To prevent panic-driven selling, stock exchanges introduced trading halts known as circuit breakers, which temporarily stop trading during sharp declines. After each crisis, new financial rules were created to increase transparency and limit excessive risk-taking by banks and investment firms. Wall Street also adopted stronger risk management strategies and advanced technology to monitor markets more effectively. Despite severe downturns, financial markets have historically recovered over time as economies improved and investor confidence gradually returned.