Great Recession Of 2008 Essay

Our economy is a machine that is ran by humans. A machine can only be as good as the person who makes it. This makes our economy susceptible to human error. A couple years ago the United States faced one of the greatest financial crisis since the Great Depression, which was the Great Recession. The Great Recession was a severe economic downturn that occurred in 2008 following the burst of the housing market. The government tried passing bills to see if anything would help it from becoming another Great Depression. Trying to aid the government was the Federal Reserve. The Federal Reserve went through a couple strategies in order to help the economy recover. The Federal Reserve provided three major strategies to start moving the economy in a better direction. The first strategy was primarily focused on the central bank’s role of the lender of last resort. The second strategy was meant to provide provision of liquidity directly to borrowers and investors in key credit markets. The last strategy was for the Federal Reserve to expand its open market operations to support the credit markets still working, as well as trying to push long term interest rates down. Since time has passed on since the Great Recession it has been a long road. In this essay we will take a time to reflect on these strategies to see how they helped.

During 1997-2006, house prices rose 85 percent. This led to an irresponsible consumer spending spree. Millions of people bought a house that they could not afford. Government regulatory agencies and mortgage lenders became less strict with credit restrictions so that people could buy homes without making any down payment. In 2007, however, the home values and sales began to decline. Due to the loss of trillions of dollars in home value, a record number of borrowers defaulted on their mortgage payments. America was put into a recession in 2008 because of the contraction of corporate spending and consumer purchased. The prices of consumer goods spiked, while employment declined. On October 3, 2008, former President Bush signed the Troubled Asset Relief Program; however, the bill did not restore the economy as a whole. By June 2009, America's economic recovery was at its weakest since the end of the Second World War. I chose this event in history because it had a major effect on America’s economy and changed the course of history. Historians need to study the Great Recession because America should learn from their mistakes. The Great Recession was due to different factors; however, if the regulations on credit restrictions were not tampered with, then the severity of the recession could have been

First, I want to give you a little background on the Financial Crisis of 2008/2009. The Financial Crisis began in December of 2007, and by the fall of 2008 the economy was in a huge downfall. This all began in August of 2007 because of defaults in the subprime mortgage market, which sent a shudder through the financial markets. The former chairman of the Federal Reserve described the crisis of 2008/2009 as a “once-in-a-century credit tsunami”. Many firms, including commercial banks, Wall Street firms, investment banks, all suffered significant losses and eventually went bankrupt. This caused households and smaller businesses to have to pay higher rates on the money that they borrowed. This downfall wasn’t just

We now know to pay attention to the red flags. We collectively shrugged off signs and signals in the years leading to 2008. The disaster was foreseeable. The extreme increase in subprime lending, the seemingly infinite increase in housing prices, and the increase in national household mortgage debt should have been alarm enough. These passed by either unnoticed, or ignored. Because of our ignorance, we were not prepared to handle the inevitable crisis.

In 2007-2008 the US went into a recession, a financial crisis that has since then taken five years to rebuild. During that time millions of Americans were unemployed and faced many economic struggles which negatively impacted the real estate market causing a multitude of foreclosures. The reason for this recession was because there was no authority over banks and they were not being monitored properly. Banks were able to gamble with the finances of millions of people with no consequences towards their actions. The Dodd Frank Act Wall Street Reform and Consumer Protection Act of 2010 was put into place to make sure that nothing like this ever happened again; The Dodd Frank Act implemented and set laws into place to make sure that banks and financial

The recession of 2008 is also called the ‘Great Recession’, said to have begun in December 2007, and took a turn for the worse in September 2008, and it was a severe economic problem expanded globally. This recession affected the world economy, and is said to have been the worst financial disaster since the Great Depression. The decline in the Dow Jones this time was -53.8%. Since the official start of the recession in December 2007, and through June 2010 there have been about 2.3 million homes foreclosed in the United States. In 2012, the state with the most foreclosures in January alone was California, with 51,584 houses being repossessed. Unemployment during this collapse was 8.5%, and continued to increase to about 10% as of 2010. People’s reaction to this recession was a huge decrease in spending and borrowing from banks, but an increase in saving.

In the lead up to the current recession, when the real estate market began to fall, there were so many investors shorting stocks and securitized mortgage packages that were already falling, that the market simply fell further. There were no buyers at the bottom, and the professional investors made millions off of the losses of others. Beyond this, there was no real federal regulation for securitized mortgages, since there was no real way to gauge the mathematical risk of any given package. This allowed the investors to take advantage of the system and to short loans on real people’s homes. Once these securities were worthless, many of the homebuyer’s defaulted on their mortgages and were left penniless. No matter from which angle this crisis is looked at, the blame rests squarely with the managers who began the entire cycle, the ones who pursued the securitization of mortgages. Their incompetence not only led to the losses of Americans who have never invested in the stock market, but to losses for their shareholders.

History helped to recognize the parallels between these eras and learn from them. The crisis of 2008 was not nearly as bad as the Great Depression, but like the Depression consumers lost trust in the market and were afraid to invest in the economy. The Housing Crash catastrophe, like the Great Depression contributed to the failure of banking institutions and led to high unemployment rates. Unlike the Great Depression, the crisis of 2008 was supported by more than a dozen economic stimulus packages provided by the federal government to jumpstart the economy. The federal government stepped in to bailout the banking institutions to avoid another Great Depression. It is important to look back on the history of these two national devastations and learn from their mistakes so we can be better prepared for future economic downfalls in the

The Great Recession, December 2007 through June2009 marks an unstable 18 months for the United States’ economy, that countless amounts of people won’t forget. The housing and bank markets during the recession were not recouping much money off loans and low interest rates, which cause both markets to nearly crash. This caused many Americans to lose their jobs and the unemployment rates to reach the highest numbers since the Great Depression. But ever since 2009, the economy has been an on slow but steady track up to being what it once was.

The 2008 financial crisis had multiple causes but the most outstanding to me is the passing of the Gramm–Leach–Bliley Act. This act repealed Glass – Steagall which removed the safeguards that came between commercial and investment banks. It destroyed regulation between the two and gave unprecedented “innovation” which allowed millions of Americans to purchase homes they couldn’t really afford. This created the American housing bubble that eventually popped do to citizens being unable to pay for their new homes. The intial burst of the housing bubble resulted in the foreclosure of 860,000 homes in 2008. Another entity at fault for the recession would be the credit rating companies. They provided the means to the consumers to take out mortgages

Ever since the Recession of 2008, the process of acquiring employment has become extremely challenging and exhausting. After months of searching, a significant amount of job seekers are willing to accept any job offers that will allow them to put food on the tables. If you follow the United States’ economic recovery, you probably know that there are about 10.5 million unemployed Americans and constant debates about how to create more jobs. What you may not know is that there are actually four million open jobs waiting to be filled. So how is it possible and who is there to blame?

There is no doubt that subprime lending was a major cause of the Recession. It was a tactic used by investment banks in order to get more money from unsuspecting homeowners. However, lenders found out that most of the people who were qualified to have a mortgage already had one. In turn, the lenders had to lower their credit criteria for people to take out a loan on a house. This is how the term subprime lending came to be in the financial world. As a result of subprime lending, the investors were able to make millions off of these mortgages. People who qualified for a subprime mortgage usually had a credit score below that of 620. To make the subprime mortgage deal more customer friendly, the lending banks decided to have the people who qualified for these mortgages didn’t have to have a down payment. Normally, the down payment would be as much as 20%, but this made it easier for people to get mortgages without having to worry about how much money they needed at the beginning of their purchase. “ Many American homeowners bought houses they could not afford,

The use of leverage is another cause of the recession. First, what needs to be explained is the process of leverage and how it was used in the time leading up to the recession. To start off using leverage to strengthen and speculate returns is dangerous. Yes in doing so you get the ability to increase your gains, but in doing so you increase your losses. In the months leading up to the recession obligations soared, households that piled on mortgage debt to the banks that leveraged their balance sheets to record levels. With the new information found blinder states that, leverage limits for the financial institutions of America are in need of reform. “Like a fine wine, a little leverage can be good for you. But just as with the consumption of alcoholic beverages, excesses can lead to disaster.” Another factor Blinder attributes to the caused of the Recession is the faulty regulatory environment. Pulling a quote for the book “The crisis [resulted from]...errors, misjudgments and even frauds by private companies and individuals, aided and abetted by a hands-off policy from a government unduly enamored of laissez-faire.” So one might ask, who was supposed to be supervising this? According to Blinder, “the Federal Reserve Board, looked away when subprime mortgages became 20% of all new mortgages in 2005.” However, not every regulator was quiet on this issue, many subscribed to have a free-market belief and viewed supervision as unnecessary restrictions on capitalism. Regulators

According to many experts, this was one of the most severe financial crises in our history since 1930. This crisis was so complex that was known throughout the world under many names, such as “the Great Recession”, “the financial crash of 2008”, “the Trouble Asset Relief Program bailout”, and “the Great Panic” (Biegelman & Bartow, 2012). Whatever its name, this crisis undoubtedly disorder the world of finance dramatically. This financial chaos, now turned into a recession, had the misfortune to expand and affect many organizations around the planet. Everyone was affected in some way or another; it was like a domino effect that apparently nobody saw it coming, and could not be stopped in time. Unfortunately many people lost their jobs due to the meltdown; million of people were subject to wage cuts, and many companies had to go out of business, because they just not endure the tremendous pressure on its shoulders.

It all began when Mexico announced to the world that they will not be able to meet their sovereign debt obligation in the summer of 1982. With the rise of large loans to the less developed countries (mainly Latin American countries such as Mexico, Argentina, and Brazil) in the 1970s, this period quickly became to be known as the “lost decade” as many creditor countries were greatly affected by a series of defaults from the debtor countries. In this paper, we will discuss the events that led up to the defaults and the impacts of the crisis. We will also look at how the crisis was resolved and what lessons we can learn from the crisis to prevent it from happening again.