Answer:
I agree that the correct answers to the question: According to the Fed, what were the major problems during the financial crisis of 2008, are:
1. The money supply became less liquid. This happened between 2006 and 2007, right before the actual crisis hit. Because of the high level of mortgage and credit to consumers, banks suddenly found themselves without the necessary liquidity to back all those loans. And since unemployment also became an issue, most banks were forced to face the lack of money flow due to non-payment of dues.
3. Lending and credit stopped. This happened as a response of the never-ending circle. Banks saw that debtors could not pay, and also, other banks were as in trouble as they were. So interbank lending fell to a minimum and the financial system began to overheat. By this point, even insurance companies, responsible for baking the mortgages and loans, were unable to do so, and even further mistrust ensued.
5. It was difficult for banks to receive the loans needed to have cash required to function. Even though the Federal Reserve tried to inject banks with the necessary funds to help, in 2007, the measure wasn´t enough, and such insurers as AIG suddenly found that they did not have the means to respond for the unpaid loans. Also, as said before, interbank mistrust started, and there was no flow of money between banks.
All these, and more, were what caused the huge Recession of 2008, the biggest, and most serious after the Great Depression.
