The Pros And Cons Of Loaning

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.

“Lehman Collapse Sends Shockwave around the World” Reads the British newspaper, The Times, as the world sinks further into the recession in September 2008. The housing collapse was orchestrated and perpetrated by a system created by investment banks to allow them to make money, by keep the American people in debt, even when the banks knew the loans would default. The investing banking system was left unchecked by the United States government because it did not have the regulations as did the depository banks. There was immoral investing in people’s retirement, pensions, and homes where it created at housing collapse, in which thousands of people over paid in their subprime loans and lost their homes in the process. The federal Reserve is a very selfish and heartless entity in America that has had powerful influence in American politics for decades. The Federal Reserve must be dissolved and succeeded by a federalized entity that has no obligation to any investors. It must contain checks and balances to create a fair playing field. It must not benefit one group of people, but the nation as a whole. Finally, the new banking structure must be solid to keep necessities at steady prices, and must not work on speculation. Prior to “the Fed”, two previous central banking systems were in place, but were limited on how long they influenced (both twenty years) their interest in government, and twice, both banking system were not allowed renewal because many political figures,

“The Fed did not bailout Bear at taxpayer expense, but enabled – as it is mandated – the financial markets to continue to function. History will call the Fed’s action the right move at the right time”, says Jeremy Siegel, Ph.D. The Bear Stearns Company began a financial meltdown in July 2007. By March 2008, it was ready to file Chapter 11 bankruptcy. Some people believe that the Federal Reserve should not have stepped in to bailout Bear Stearns because it was rewarding reckless business behavior and Bear should have been left to file bankruptcy. The deal of Bear Stearns was not a government bailout; it was rather a loan to preserve jobs, homes, savings, the economy, the shareholders of Bear, and the financial

History has shown us again, and again that when power is left unchecked it becomes corrupt and out of control, that is the iron law of oligarchy. In the US we saw this happen recently in the 2008 economic meltdown. The banks and corporations should never have been aloud to become "to big to fail," and once they did grow to a point when they were there should have been more government oversight to make sure things did not get out of hand. After the great depression laws were put in place to try to prevent something like that from ever happening again, but we undid those restrictions and ended up in a place eerily similar to somewhere we had been before. In this paper I will cover a brief history of the great depression, and show how the situation in 2008 was all too similar. I will also discuss and analyze the factors that brought us to the tipping point in our most recent economic scare. And finally I will explain why the actions taken by the FED were necessary and kept us from an even more

In the suggested viewing of the piece Bill Moyers Journal: Facing the Economic Fallout it addresses how the economic fallout led to U.S. taxpayers picking up the slack for private businesses that had been able to benefit for grossly huge profits, bonus, and buyouts during this devastating period in U.S. history, (Moyers). The lack of accountability in some of our nation’s most powerful institutions led us in what could have been a repeat of the great depression of the 1920’s. As stated in the video journal, “markets and institutions are so connected that one failure starts the domino effect.”

This paper is about how did “Shadow Banking” precipitate the financial Crises. Then discusses the impacts of the crisis on the major financial institutions.

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

The bailout was a slap on the wrist for the major banking companies; they were not punished for their risky investments. The amount they were forced to pay in fines was merely nothing compared to the amount of money their bank makes per year. As said by William Cohan who worked on Wall Street for seventeen years as a mergers and acquisitions

During Reagan's administration, Continental Illinois, the 8th largest commercial bank at the time, was bailed out because there was a fear that if International bond holders saw a large bank failing, they would pull money out of all American bank. So, after Continental Illinois was bailed out, large banks started to become dependant on the government. They began to act riskier with investments because they knew the government would bail them out. During Bill Clinton’s presidency a similar situation occurred, further clearing the message that if you are a large bank and are about to fail, the government will take tax payer’s money to bail you out. Again, during Bush’s last year as president, because of a fear of a recession, Bush once again bailed out large banks. It is a continuous cycle that unnecessarily and negatively impacts everyday people. Government has now got itself trapped in a bubble where they will constantly bail out large banks due to the fear of a economic collapse, but each time the government bails out the banks, the potential crisis worsens. The government is not responsible for saving the banks, only our

I believe the recent Feds stimulus package sends a message to the companies that it’s ok to be reckless because tax payer’s money will be used for bailout. The Feds provided favorable loans terms over two years span for the trouble companies through emergency lending of over $16 trillion which paid interest rate below prevailing market rate. There are no clear and forceful rules and regulation for emergency lending therefore Feds will continue to bailout companies based on vague guidelines. The legislative language is far too broad and vague to be effective for example “Under Section 1101 of the law, emergency lending must be secured by good collateral and may only be performed through programs with "broad based eligibility" that are limited

In a globalized world, the Common Good Approach has increased in relevance for judging ethical behavior. It presents “a vision of society as a community whose members are joined in the shared pursuit of values and goals they hold in common” (Markkula, para 12). This Approach calls attention to the conditions that are important to the common welfare of everyone. The principle states: "What is ethical is what advances the common good" (Markkula, para 12). The common goal when considering the bailout is a stable economy. What remains unanswered is why some financial institutions, such as JPMorgan Chase and Goldman Sachs, were helped with TARP funds while other banks, such as Bear Stearns and Lehman Brothers, were allowed to

The system existed but it had no enforcement, and the loan would be sold from bank to bank quickly. The process was so quick that many of the employees just followed the process and did not question authority. When the extremely high interest kicked in, the buyer could not make the payment and default began. I believe that bank understood the process and they wanted the default because the government (taxpayer) would bail them out and the bank would earn millions on bail out. I also believe house market will crash again because of greedy

It is unethical for the government to favor wealthier citizens while imposing risk/losses on less wealthier taxpayer. During the economic downturn mortgage lenders such as Fannie Mae and Freddie Mac were bailed out. These were private companies. When they made profits, their owners enjoyed the profits but when they collapsed the US government committed up to $200 billion to save these two from collapse. Wealthier citizens were favored because the shareowners of Fannie Mae and Freddie Mac managed to get loans at very low rates and leveraged these to make large profits. But when these firms collapsed their losses were borne by the normal taxpayers. This situation creates moral hazards. The firms feel that they may take unreasonable risks because if they fail the government will bail them out and the firm taking the risk will not take the costs of failure.

The financial crisis of 2007-2008 that caused the stock market to drop significantly worldwide as well as led many people to unemployment, foreclosures, and evictions still resonates in today’s economy. All sorts of investigations are still in the process to find and bring to justice the culprits of such a large-scale collapse of the market. Some of them have lasted several years and only recently came to an end. Not that long ago settlements between the government and the biggest U.S. banks such as J.P. Morgan and Bank of America have occurred. They agreed to pay $13 and $17 billion to the government respectively. A tremendous portion of the penalty came from the companies that the banks purchased during the recession. Controversy around

One is the fact that the bailout was saving many Americans their jobs by ensuring these companies stay afloat. GM had many employees and many retirees that depended on the company, and if the company closed down, it would render so many people jobless and without a source of income. On the other hand, according to the law of utilitarianism, it was ethical for the government to lend a helping hand to GM to keep the company afloat. The initial agreement between GM and the government provided the option of the company redeeming its stake back from the government once they achieved financial stability. Unfortunately, this never came to be. The government invested taxpayers’ money in a collapsing company that was experiencing losses year in year out. This was unethical; the company should have bailed itself out from this crisis since there were other automotive companies still afloat. Justice dictates that since it is GM that got themselves into this mess, then the same company should figure out a way out of the same mess. This is true since even when the government opted to bail out GM, it was the company that drew up a plan that would give them financial stability. Therefore, one would argue that GM should have figured out a way to solve their financial crisis by selling out the non-profitable plants and sections of the company and cutting costs to become profitable once more. They should also have invested in