The Financial Crisis Of The Troubled Asset Relief Program

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.

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

In the midst of the current economic downturn, dubbed the “Great Recession”, it is natural to look for one, singular entity or person to blame. Managers of large banks, professional investors and federal regulators have all been named as potential creators of the recession, with varying degrees of guilt. No matter who is to blame, the fallout from the mistakes that were made that led to the current crisis is clear. According to the Bureau of Labor Statistics, the current unemployment rate is 9.7%, with 9.3 million Americans out of work (Bureau of Labor Statistics). Compared to a normal economic rate of two or three percent, it is clear that the decisions of one group of people have had a profound affect on the lives of millions of

Government help was seen as the only way to avoid a total economic collapse in the United States, although many thought it could result in a worldwide economic recession. On September 18, 2008 the 700 dollar bailout plan was proposed to congress. Fed Chairman Ben Bernake is quoted telling congress, “If we don’t do this, we may not have an economy on Monday” (The Housing Market Crash of 2007, 2011). This is when it became apparent that the government had a stake in this situation. When people begin questioning whether the United States economy will still exist, the government then has a huge role in the survival of not just the economy, but the entire country. The government is in a situation where it must decide how to protect the American economy, the citizens, the businesses, and the future of the United States of America. On October 3, 2008 congress passed “Emergency Economic Stablization Act” (H.R. 1424- 110th Congress, 2008) which led to the lending of 700 billion dollars’ to

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

Investors and mortgage holders owe so much money to different firms that is has become almost an irreversible meltdown. The government tried to raise and cut taxes where they think they can get caught up and it doesn’t change. Money is owed by nearly every institution as well as the day to day expenses that each one occurs. Homes in major cities around the country lay to waste leaving blocks of run-down wasteland. Jobs and unemployment are just now starting to stabilize. Th economy is making a slow change for the good, but you must take baby steps after you fall. According to the Bureau of Labor Statistics Chart October 2007 unemployment was at 4.7% and rose to 10% by the year 2009 and everything from construction to professional and business services decreased by an average of 37.4% (Bereau Of Labor Statistics). These statistics are horrible and one can only hope we do not repeat our mistakes. A conclusion can now be made with all the factors stated

In the history of the United States, we have experienced numerous financial crisis, where millions have been affected. Some of them include the great depression in 1929, World War II, and recently the financial crisis of 2008. The government has tried to learn from these past events and implement new procedures that would prevent from occurring once again. However, it seems like there is always something new to learn from when these type of events occurs. As such, the government always tries to addressed the issues, but in some instances are praised and in some criticized. Two of the most important legislature that have been passed in order to prevent financial crisis and protect the consumers and the economy of the United States are the

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.

In this essay, I will briefly explain what happened during the financial crisis of 2007-09, and also discuss the contribution of the government to the financial crisis.

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 2008, the United States went through one of the most significant economical period in history. The housing market and banks started to fail and people were unable to pay off their loans on the houses. This lead to a giant need for government intervention in determining which investment banks and corporations were worthy of being considered “too big to fail”. If they were in this category, the government would supply them with the funds necessary to not go bankrupt. Most of the time, the corporations would put this money towards consolidating their balance sheets, rather than solving the problems. This paper looks in depth into the 2008 financial crisis: the course

Consumer concern over a declining housing market, political gridlock in Washington, high energy and healthcare costs, and budget worries collectively have resulted in an economic meltdown in need of a recovery. After 9/11, central banks around the world cut interest rates so low that investors borrowed disproportionate amounts of money leading to reduced liquidity and a buildup of foreign exchange outside the United States. While at the same time, Americans overindulged in consumption without saving any money. Homeowners extracted value from their homes to subsidize mortgagees with government support coming to late. According to United States Department of Commerce (2013) with the national unemployment rate at 7.4 percent, not counting those that have stopped even looking for work, wages paid to workers were the smallest share of Gross Domestic Product (GDP) since the 1950s. In December of 2008, a full recession hit our country and the Federal Open Market Committee answered the call

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.

In December 2008, in the immediate aftermath of the bankruptcy of Lehman Brothers, the Fed took an exceptional measure and lowered the federal funds rate to a range of 0% to 0.25%, which is referred to as the “zero lower bound” because the Fed cannot provide any further stimulus through conventional policy. Since then, following from a Keynesian perspective the government took the responsibility to stimulate economy by increased spending and restoration of aggregate demand through supply of easy money.

submitted on Sunday, 26 June 2016, 10:51 AMmodified on Sunday, 26 June 2016, 3:48 PM