Marconi (2010) believes that the role played by institutional investors has propagated financial crises. Institutional investors, whether individuals or corporations, enjoy the benefits of low preferential fee regulations. This is due to their large and professional investments. Institutional investors such as mutual funds, pension funds, hedge funds such as Magnetar Capital, and life insurance companies such as AIG and hedge funds contributed to the global financial crisis of 2007-2008. This financial crisis, also called the Great Recession, was triggered by liquidity problems in the United States economy. According to Geczy (2010), many large financial institutions have collapsed. The government had to bail out some banks and this led to a decrease in investment in stocks and money market funds in the United States and spread throughout the world. A report compiled by the US Financial Crisis Investigation Commission shows that the infamous global crises could have been avoided. He pointed out that the failure of several financial institutions, including the Federal Reserve, accelerated the crisis. Lehman brothers; one of the three largest investment banks in the United States was sued in the 2007 financial crisis. The bank failed and had to be sold in September 2008 (Currie, 2010). The other two banks, Morgan Stanley and Goldman Sachs, had to become commercial banks where more regulation was implemented. The collapse of large and important financial institutions such as Lehman Brothers propagated the economic crisis. In two days after the collapse of Lehman Brothers, investors withdrew more than $150 billion from US money market funds. This caused instability in the money markets, so nee...... half of the paper......uest.com/Laurence B., 2010. Research Foundation Of Cfa Institute, ScuLeavey School Of Business Research Paper No . 10 -04. Available at: Ssrn:Http://Ssrn.Com/Abstract=1523931Manconi, Alberto, Massa, Massimo and Yasuda, Ayako, 2010. The role of institutional investors in the propagation of the 2007-2008 crisis. Research paper no. 04-10 of the UC Davis Graduate School of Management. Available on SSRN:Shefrin, Hersh M., 2009. How Psychological Pitfalls Generated the Global Financial Crisis.Voices Of Wisdom: Understanding The Global FinancialQuinn James, 2011. JPMorgan, Citigroup Helped Trigger Lehman Collapse, Report Says. Retrieved from: http:// lehmanreport.jenner.com/ VOLUME%205.pdf