Two months before the presidential election of 2008, Paulson seized Fannie Mae and Freddie Mac as fraudulent trading in securities markets ravaged their share prices. Then the third largest investment bank Lehman Bros. collapsed into bankruptcy under the same kind of manipulative bear attack. With Lehman destroyed, Paulson recapitalized AIG, wiping out equity shareholders, so the firm would have funds to pay liabilities on derivatives called credit default swaps. Credit markets froze, private capital withdrew from markets, and the global economy fell under exorbitant energy prices.
