How the Deregulation of Banks Caused the Great Recession

First, we need to understand how the Great Recession occurred. It all started with President Ronald Reagan in the 1980s. Reagan was famous for his supply-side economic views (Amadeo 1). He used top-down economics meaning he used government intervention to give businesses tax breaks and subsidies to create economic growth. With this he also started a continuing phenomenon to deregulate Wall Street. He believed this would create vast economic growth and it did. But it created a bubble and it

Secondly, out of the twenty-five stockholders of the Bank, five of these were government owned. Thus showing support of the Bank by subscribing to one-fifth of its $35 million (Schlesinger 74). In addition, among the Bank’s functions was to hold all government money, sell all government bonds, and make commercial loans. However, no voters could dictate its policies or reign in its power, due to its privately owned status (Roughshod 2). Finally, the government also allowed bank notes to be used as payment for taxes.

Similarly, the Great Recession was due to consumer spending cutbacks and a drop in demand for the establishment of new housing. In the two decades previous to 2008, the American growth rate was very high. Their household needs also became very high, which made demand increase. Spending was at a high. However personal income was decreased. The consumers then had to borrow money from the banks. This gave the consumers debt. So, when the house prices rose, banks stopped loaning money to people and the people decreased their spending. This happened because the people were not able to pay the banks back. People also cut back on buying or making new houses, so household demand dropped. Many say that this decrease caused the Great Recession. Housing was one of the main subjects that many believe, caused the Great Recession. “Subprime” mortgage availability and low interest

The “Great Recession of 2008" hit The United States and the rest of the world with a force not seen since the Great Depression less than a century ago. December of 2007 saw an unemployment rate of 5.7% as the economy was rolling forward on the back of the high-profiled housing market funded by aggressive loans to consumers with sub-par credit. (National Bureau of Economic Research) This created a proverbial “House of Cards” that fell apart that same month and over the course of two years; the unemployment rate would nearly double as The United States would lose over 8 million jobs according the National Bureau of Economics. The cause of The Great Recession can’t simply be quantified to just one person, agency or company. However, in the broad

The Great Recession officially began in December 2007 and ended in June 2009, making it the longest recession since World War II. Some people blame it on the greed of the Wall Street bankers and others on subprime mortgage lenders. It began with the bursting of an 8 trillion dollar housing bubble. The subsequent loss of wealth prompted sharp reductions in consumer spending. This loss of consumption, joined with the financial market mayhem, also led to a collapse in investment banking. Massive job loss followed the same trend as the dwindling consumer spending and business investment. In 2008 and 2009, the U.S. labor market lost 8.4 million occupations - the most considerable business contraction of any recession since the Great Depression. The Great Recession of 2008 was sparked by the housing crisis and Americans today still struggle with its effects.

The Great Recession of 2008 hit U.S citizens hard and many still wonder if it could have been prevented and why the country didn’t see it coming. The growth of the new phenomenon of mortgage backed securities and little regulation in the financial industry made it easy for banks, financiers and rating agencies to make money quick and easy leading to a heated market that eventually collapsed.

The Great recession occurred in America in 2007 when the economy began to decline. The cause of the recession can be contributed to many different sources, but it is clear that the main causes of the recession were deregulation, the “housing bubble”, corruption of “gatekeepers”, derivatives, the strategies of K street markets, and private debt.

A variety of things led up to the great recession of 2008, from a period of moderation, to a housing bubble, to a housing bubble bust. the government hasn't witnessed an economic downturn like this since the great depression. here are the main reasons why this recession happened. It all started with the moderation showed in the economy between 2000 to 2007. there was low inflation, strong economic growth, and falling unemployment. however, through all this, there was growing instability in terms of credit and financial markets. The next cause of the great recession was a housing bubble. Prices in housing quickly grew to really high prices, this was due to the high confidence and bank lending. Banks later started becoming more careless with

The Recession of 2008 was caused by two major faults: the use of subprime lending and changes in banking culture leaning towards self interest within the banking industry.

The Bank of the United States is a symbol of the long held American fear of centralization and government control. The bank was an attempt to bring some stability and control and was successful at doing this. However, both times the bank was chartered, forces within the economy ultimately destroyed it. The fear of centralization and control was ultimately detrimental to the U.S. economy.

Today I will be persuading you why the banks are to blame in the great recessions that occurred in 2008. There are many reasons why the banks are to blame. First, the banks were giving subprime loans which caused lots of damage to the economy. What a subprime loan did was allow almost anyone to receive a loan. People with lower credit generally took this route. The reasoning for this is because they knew they would not qualify for a regular loan, but the banks had so much greed they did not care for the economy, others or themselves. The subprime loans actually had a bigger part in the great recession than people thought. Subprime loans triggered a lot of problems. Not only problems for citizens, but

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

This recession has been the biggest economic struggle in my lifetime. Everything that could go wrong went wrong. The event that led to this recession is the housing crisis, where banks were giving out loans, almost without any restrictions. People were getting involved in one of the best economic times in our history. Confidence was everywhere and the ideal mindset hit everyone. When the economy hit all new highs, people thought the supply and demand chain would continuously rise. The business cycle seemed to be a lie to many Americans. However, the business cycle is real and the world lives a part of it everyday. When deregulation became extreme and private companies, especially banks, got all the power, nothing could stop them

There has been a debate for years on what caused the Financial Crisis in 2008 and if there was one main cause, or a series of unfortunate events that led to the crisis. The crisis began when the market was no longer funding many financial entities. The Federal Reserve then lowered the federal funds rate from 5.25% to almost zero percent in December 2008. The Federal Government realized that this was not enough and decided to bail out Bear Stearns, which inhibited JP Morgan Chase to buy Bear Stearns. Unfortunately Bear Stearns was not the only financial entity that needed saving, Lehman Brothers needed help as well. Lehman Brothers was twice the size of Bear Stearns and the government could not bail them out. Lehman Brothers declared bankruptcy on September 15, 2008. Lehman Brothers bankruptcy caused the market tensions to become disastrous. The Fed then had to bail out American International Group the day after Lehman Brothers failed (Poole, 2010). Some blame poor policy making and others blame the government. The main causes of the financial crisis are the deregulation of banks and bank corruption.

A Balloon Mortgage loan is a short-term loan that contains some risk for the borrower. Balloon mortgages can help you get into a mortgage loan, but again should be financed into a more reliable or stable payment product as soon as financially feasible. The Balloon Mortgage should be well thought out with a plan in place when getting this product. For example, you may plan on being in the home for only three years.