Summary: The 2008 Financial Crisis

In 2008, the American economy broke down. Known as the Global Financial Crisis, this is widely considered to be the worst financial crisis since the 1930’s when the stock market crashed and the Great Depression hit.

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

On October 3, 2008 President George W. Bush signed the Emergency Economic Stabilization Act of 2008, otherwise known as the “bailout.” The Purpose of this act was defined as to, “Provide authority for the Federal Government to purchase and insure certain types of trouble assets for the purpose of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, to amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes” (Emergency Economic Stabilization Act). In my paper I will explain and show the relationship between the Emergency Economic Stabilization Act of 2008 and subprime lending, the collapse of the housing market, bundled mortgage securities, liquidity, and the Government 's efforts to bailout the nation 's banks.

The objective of the American Recovery and Reinvestment act, also known as the “stimulus” was to end the recession that had occurred in 2008. The recession had a major impact on the U.S job market. The United States congress approved the act which consisted of an investment of 787 billion dollars in order to encourage customer spending and also to save old jobs and create new ones.

People believe the American Recovery and Reinvestment Act or ARRA had a centralizing effect, yet there are motives that support, as well as some that oppose the act. The act is sometimes referred to as The Stimulus or The Recovery Act. The United States Congress in February of 2009 passed this Act and it was signed in the same month, by President Barack Obama.

The American Recovery and Reinvestment Act of 2009 (Recovery Act), is an economic stimulus package that was signed into law in February of 2009 (Grunwald, 2010). The Recovery Act was enacted to stimulate the United States (U.S) economy during the (2007-2009) recession (Investopedia. 2009). According to The White House, the Recovery Act “includes measures to modernize our nation's infrastructure, enhance energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect those in greatest need. (The White House, United States Government, 2009)”.

In recent years, financial organizations have been bailed out to prevent the financial collapse of the economy. The Troubled Asset Relief Program (TARP) provided relief funds to financial institutions. This program is a part of the Emergency Economic Stabilization Act of 2008. While controversial, the Obama administration determined it was necessary to prevent worldwide economic failure. This bail out was necessary to add stability to the financial markets after high-risk investments and fraudulent practices of the largest banking institutions in the US

In 2012, the Troubled Asset Relief Program (TARP) it was a $700 billion banking rescue package enacted in late 2008. TARP rescued the banking and auto industries, provided loan guarantees, and helped stave off mortgage foreclosures. The government $430 billion of the total $700 billion approved. After repayments and a $25 billion profit, “the TARP’s ultimate net cost to the taxpayers was just $32 billion,” according to March 2012 estimates by the Congressional Budget Office. The TARP program succeeded in helping the economy recover and stabilizing the banking sector. One 2011 study showed that without TARP and other crisis management policies, US GDP would have been 6% lower, the unemployment rate 3% higher and almost five million more people

The unprecedented government intervention during the massive economic crisis of the late 2000’s was met with varied sentiment of economists (Lee, 2009). For example, economist Marci Rossell felt that government intervention was arbitrary and lacked clarity as to which firms would receive government aid (Lee, 2009). She furthered her argument by stating that if the government bailed out homeowners and banks that were borrowing and lending “over their heads,” they were creating a dangerous precedent to set (Lee, 2009, p.40). However, Rossell praised the Obama administration for having a clear grasp on the economic situation and trusted in this administration’s guidance to recover from the economic crisis. Conversely, economist Steven Schwarcz said that though the government bailout in 2008 would cost more than it would have if the government had reacted more swiftly to early signs of recession, these institutions would collapse and fail without government aid (“How Three Economists,” 2008). If these institutions failed, the ripple effect of this failure to the U.S. economy would be irreparable.

The Troubled Asset Relief Program as part of the Emergency Economic Stabilization Act was an initiative signed into law on October 3, 2008 by then President George W. Bush. TARP authorized the U. S Treasury to purchase up to $700 billion in assets and securities from financial institutions in a response to a potential financial crisis and to stabilize the U.S financial markets. The big picture financial system of the nation is configured in such a way that it acts as the channel between corporations and individuals. Essentially the

The financial crisis of 2008 is known to be the worst disaster in our economy since the great depression in 1929. When federal reserve dropped interest rates to just 1%, investors turned away from such a low return. However, this 1% interest rate is beneficial to banks because they now can borrow from the fed much easier for less. Now there is a bunch of cheap credit across the country. Banks would use leverage to create great deals for profit, they continued the process and became beyond rich, then payed back the government. Investors see this occurring and want to start using leverage in their own way to make money. The investors connect themselves to homeowners and use leverage with mortgages. A family that wants to purchase a home pays

From the Financial crisis that struck the United States in 2008, to the world economic crisis and currently the European debt and sovereign crisis, the snowball is growing each day as the whole world's economy is heading towards the rock bottom. This project tackles the issue and the causes of the European debt crisis and its consequences on the euro currency and on the international financial markets. It also focuses on examining the austerity measures and policies taken by European governments to bail their countries out of the turmoil, and finally it tenders solutions that could be undertaken by governments to face or unravel such

2008 Global Financial Crisis was followed by the crash of the U.S. subprime mortgage security market. To illustrate the subprime mortgage security market with an example, considered the bank have only 100 dollars, and the bank lend this money to person A on an insets rate of 8% for him to buy a house without having his pledge. However, the bank want to lower the risk and have another 100 dollars to spend. So the bank sell person B a 100 dollars security bond that has a 5% interest rate. In other words, person B would has a security because even if the bank don’t have any money in the future, the bank still can pay back person B with the debt of person A. Therefore, the bank have another 100 dollars to lend to another person to repeat the cycle.

The 2008 financial crisis is considered the worst period of economic stagnancy since the Great Depression. This economic upheaval brought once impervious multi-national corporations, like GM and Goldman Sachs, to their knees. One would think that such a calamity would have been easily predicted; however, crises of this magnitude go unnoticed due to their multifarious and seemingly innocuous triggers. The financial crisis of 2008 was caused by the proliferation of subprime mortgages, increased leverage ratios, and the growth of the United States housing bubble.

The 2008 financial crisis can be traced back to two factor, sub-prime mortgages and debt. Traditionally, it was considered difficult to get a mortgage if you had bad credit or did not have a steady form of income. Lenders did not want to take the risk that you might default on the loan. In the 2000s, investors in the U.S. and abroad looking for a low risk, high return investment started putting their money at the U.S. housing market. The thinking behind this was they could get a better return from the interest rates home owners paid on mortgages, than they could by investing in things like treasury bonds, which were paying extremely low interest. The global investors did not want to buy just individual mortgages. Instead, they bought