question: What exactly does it mean for the United States bank to default? How would this impact the people of the US? How about the world?
comment: The US defaulting means that the US will refuse to pay some (or all) of its debts to others. Basically this means that the US has taken out "loans" (in a simplified context) and owes others money back to pay off its loans. If it defaults, it would just tell everyone "Sorry, you're not getting paid what I owe you". The US currently has a very large amount of debts. The US would NOT default, ever. The entire world economy is based off the fact that the US always pays its loans. Its even got a name, its called "risk free". Seriously. I cannot at all emphasize this enough that the entire world economy looks at US debt, and that the US pays off its loans and everything at all times, always, without a doubt, as the single most important aspect of the economy in likely the entire history of the world. Its that big of a deal and that important. The entire financial system and economy is based off that the US always pays its debts. If for some reason the US didn't pay its debt, we would likely be in some utterly wild, extreme case that doesn't resemble today's world, so you can't really speculate on what that would be.
passages: BULLET::::- The Bank of International Settlements warns about the problems with structured financial products, and points out the conflict of interest of credit rating agencies - that they are being paid by the same companies they are supposed to be objectively evaluating.
  
  BULLET::::- February: The Office of Thrift Supervision implements new rules that allow savings and loans with over $1 billion in assets to meet their CRA obligations without investing in local communities, cutting availability of subprime loans.
   As a result of its federal bailout and management problems, "The Wall Street Journal" reported that the Bank of America was operating under a secret "memorandum of understanding" (MOU) from the U.S. government that requires it to "overhaul its board and address perceived problems with risk and liquidity management". With the federal action, the institution has taken several steps, including arranging for six of its directors to resign and forming a Regulatory Impact Office. Bank of America faces several deadlines in July and August and if not met, could face harsher penalties by federal regulators. Bank of America did not respond to "The Wall Street Journal" story.
   BULLET::::- October 14: Following a model initiated by the United Kingdom bank rescue package announced on October 8, the US taps into the $700 billion available from the Emergency Economic Stabilization Act and announces the injection of $250 billion of public money into the US banking system. The form of the rescue will include the US government taking an equity position in banks that choose to participate in the program in exchange for certain restrictions such as executive compensation. Nine banks agreed to participate in the program and will receive half of the total funds: 1) Bank of America, 2) JPMorgan Chase, 3) Wells Fargo, 4) Citigroup, 5) Merrill Lynch, 6) Goldman Sachs, 7) Morgan Stanley, 8) Bank of New York Mellon and 9) State Street. Other US financial institutions eligible for the plan have until November 14 to agree to the terms.
   Consequently, CLO issuance slipped to a still-healthy $97.34 billion in 2015, though it slowed considerably at the tail end of the year, and all but shut down in the early months of 2016, as the leveraged loan market battled investor resistance to risk in general, amid plunging oil prices. In response to the risk-retention rules, Sancus Capital Management developed the Applicable Margin Reset (AMR) protocol, which obviated the need to comply with the risk-retention rules for transactions issued prior to December 2016.
   The bank agreed to install a monitor to oversee the bank's money laundering controls for at least two years, and appoint "permanent officials who will audit the bank's internal procedures to prevent offshore money laundering". The monitor will report directly to the DFS. Lawsky's statement said "the parties have agreed that the conduct at issue involved transactions of at least $250bn." The bank issued a statement confirming that a settlement with the DFS had been reached and that "a formal agreement containing the detailed terms of the settlement is expected to be concluded shortly".
   BULLET::::- One member chosen by the Speaker of the House and the majority leader of the Senate, following consultation with the minority leaders of Congress (Damon Silvers was appointed on November 14)
  
  The first meeting of this board was held Wednesday, November 25, 2009, and elected Elizabeth Warren as the chairperson and Damon Silvers as deputy chairperson. As no assets had yet been purchased, (OFS instead chose to provide $250 billion to banks through the Capital Purchase Program) it is not clear whether the requirement to report after 30 days from "first asset purchase" has been violated.
   Sheila Bair, chair of the Federal Deposit Insurance Corporation reported that during a meeting with the Treasury secretary at the depth of the financial panic, Thain asked the secretary if the TARP program would impact his compensation.
  
  Section::::Departure from Bank of America.
   Global stock markets declined on August 8, 2011, following the announcement. All three major U.S. stock indexes declined between five and seven percent in one day. However, U.S. treasury bonds, which had been the subject of the downgrade, actually rose in price and the dollar gained in value against the Euro and the British pound, indicating a general flight to safe assets amid concerns about a European debt crisis.
   Regulatory responses to the subprime crisis
  
  Regulatory responses to the subprime crisis addresses various actions taken by governments around the world to address the effects of the subprime mortgage crisis.
  
  Regulators and legislators are considering action regarding lending practices, bankruptcy protection, tax policies, affordable housing, credit counseling, education, and the licensing . Regulations or guidelines can also influence the nature, transparency and regulatory reporting required for the complex legal entities and securities involved in these transactions. Congress also is conducting hearings to help identify solutions and apply pressure to the various parties involved.
   BULLET::::- November 28: The Bank for International Settlements (BIS), the global organization behind the Basel Accord, issues a consultative paper providing supervisory guidance on the valuation of assets. The paper provides ten principles that should be used by banks to value assets at fair market value.
  
  Section::::2010.
   As we work our way through this turbulence, our highest priority is limiting its impact on the real economy. We must maintain stable, orderly and liquid financial markets and our banks must continue to play their vital role of supporting the economy by making credit available to consumers and businesses. And we must of course focus on housing, which precipitated the turmoil in the capital markets, and is today the biggest downside risk to our economy. We must work to limit the impact of the housing downturn on the real economy without impeding the completion of the necessary housing correction. I will address each of these in turn. Regulators and policy makers are vigilant; we are not taking anything for granted.
   Section::::Consequences.:Consequences for the citizen.
  
  If the individual citizen or corporate citizen is a creditor of the state (e.g. government bonds), then a default by the state can mean a devaluation of their monetary wealth.
  
  In addition, the following scenarios can occur in a debtor state from a sovereign default:
  
  BULLET::::- a banking crisis, as banks have to make write downs on credits given to the state.
  
  BULLET::::- an economic crisis, as the interior demand will fall and investors withdraw their money
  
  BULLET::::- a currency crisis as foreign investors avoid this national economy
   BULLET::::- "Our overriding concern stems from the lack of progress made by the members of the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) to address several critical issues as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), enacted in 2010. That concern increases each day that the implementation of systemic risk reform languishes. A sense of complacency has made reforms for effective oversight seem less urgent despite escalating problems elsewhere in the global financial system. In many ways, the financial system faces larger potential challenges today than it did in the run-up to the 2008 crisis, given the troubled state of the European Union and uncertainties at home related to fiscal and monetary policy. It is essential that the FSOC show leadership in coordinating the rule-writing process to promote the development of cohesive, consistent regulations and provide clear and transparent explanations of the reforms in a way that is understandable to the general public. We have created this Council to assist in that effort."
   BULLET::::- "More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011. Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon."
   BULLET::::- June 25: FDIC Chair Shelia Bair cautioned against the more flexible risk management standards of the Basel II international accord and lowering bank capital requirements generally: "There are strong reasons for believing that banks left to their own devices would maintain less capital -- not more -- than would be prudent. The fact is, banks do benefit from implicit and explicit government safety nets...In short, regulators can't leave capital decisions totally to the banks."
  
  BULLET::::- July 19: Dow Jones Industrial Average closes above 14,000 for the first time in its history.
   Dodd-Frank's Orderly Liquidation Authority, "which allows the federal government to step in if a bank is near collapse to provide a backstop to ensure the institution's failure would not spread to the rest of financial system", would be eliminated.
  
  Section::::Response from Republicans.
   On August 5, 2011, the Federal Housing Finance Agency announced that the FHLBanks had satisfied their obligation to make payments related to the Resolution Funding Corporation (RefCorp) bonds. The Banks were required to pay 20 percent of their net income (after payments to the Affordable Housing Program) toward the RefCorp bond payments. Each Bank now pays 20% of its net income into its own separate restricted retained earnings account until the account equals one percent of that Bank’s outstanding consolidated obligations.
  
  Section::::History.
   Foreclosure of the borrower's house will result in a negative entry on the borrower's credit rating, possibly making obtaining loans in the future more difficult or more expensive for the borrower. With otherwise good credit a new mortgage from US government agencies will be denied until 3 (FHA) to 7 years (FNMA) have passed since the actual date of foreclosure.
   BULLET::::- The GSEs (Fannie and Freddie) have an 'implicit guarantee' from the government; that if they get into trouble, the government will bail them out. There is no written law or contract stating the government will do this; it is simply assumed by the industry, government officials, and investors. This implicit, unstated guarantee is what allows the debt of Fannie and Freddie to be moved off of the balance sheet of the government. This makes the national debt falsely appear to be lower than it really is, and artificially makes the budget look more balanced. This arrangement will not be tested until 2008 (see below)
   BULLET::::- November 15: The group of 20 of the world’s largest economies meets in Washington DC and releases a statement of the meeting. Although no detailed plans were agreed upon, the meeting focused on implementing policies consistent with five principles: strengthening transparency and accountability, improving regulation, promoting market integrity, reinforcing cooperation and reforming international institutions.
  
  BULLET::::- November 17: The Treasury gives out $33.6 billion to 21 banks in the second round of disbursements from the $700 billion bailout fund. This payout brings the total to $158.56 billion so far.
   The Business Roundtable, an industry trade organization, wrote a letter to members of the House strongly endorsing the bill. According to the Business Roundtable letter, a survey of chief financial officers and corporate treasurers "underscores the urgent need for the end-user provisions" in this bill because "eighty-six percent of respondents indicated the fully collateralizing over-the-counter (OTC) derivatives would adversely impact business investment, acquisitions, research and development, and job creation." The letter concluded that the Business Roundtable "supports efforts to increase transparency in the derivatives markets and enhance financial stability for the U.S. economy through thoughtful new regulation while avoiding needless costs."
   The Third Basel Accord, the latest in a series of international agreements among central banks and financial regulators to standardize capital requirements for banks, directs financial institutions to, among other things, set aside additional capital reserves to account for the risk that counterparties participating in certain derivative agreements could default on the transaction. This additional capital requirement is known as the credit-value adjustment (CVA). H.R. 1341 would direct the Financial Stability Oversight Council (FSOC) to complete a study of the likely effects that differences between the way the United States and foreign regulators implement the CVA would have on financial institutions, users of derivatives, and derivatives markets. The study would include, among other things, an examination of the effect those differences would have on the pricing and cost of derivatives as well as the competitiveness of United States derivatives markets. H.R. 1341 would direct the FSOC to prepare a report of its findings for the Congress within 90 days of the date of enactment of the bill.
   BULLET::::- For $8.5 billion, ten banks settle to stop mortgage foreclosure process audits. The United States government regulators had been engaged in a loan-by-loan review of home loan practices during The Great Recession. Bank of America, Citigroup Inc, JPMorgan Chase & Co, Wells Fargo & Co, MetLife Bank, Aurora Bank FSB, PNC Financial Services Group Inc, Sovereign Bank NA, SunTrust Banks Inc, and U.S. Bancorp settle with regulators to pay out cash up to $125,000 to homeowners whose homes were being foreclosed when the paperwork problems emerged. Further, Bank of America agrees to pay $11.6 billion to government mortgage finance company Fannie Mae.
   Only days later, Countrywide Financial disclosed to the U.S. Securities and Exchange Commission (SEC) that these disruptions in the secondary mortgage markets could hurt it financially:
   On March 27, 2009, A spokesman said the U.S. Treasury Inspector General is reviewing actions by the Office of Thrift Supervision on backdating banks’ capital injections after the regulator’s acting director was removed and placed on leave. Inspector General Eric Thorson gave findings “regarding certain actions by management” at OTS to Treasury Secretary Timothy Geithner, replaced Acting Director Scott Polakoff pending an investigation, according to separate statements. John Bowman, the deputy director and chief counsel, was named the agency’s acting director, OTS said. The OTS permitted five banks, including failed lender IndyMac Bancorp Inc., to revise capital reports for the first quarter to show higher levels after the period ended. The action allowed lenders, such as IndyMac, to avoid further regulatory restriction.
  