Description
For the Portfolio Project, in a well-constructed paper, identify four policies the government enacted following the financial crisis. Evaluate what effect these policies would have on the economy from both a short-run and a long-run perspective. Be sure to include:
- The distinction between the short-run and long-run economic views and what determines economic output in the relative time periods
- A definition of the measures used to determine economic success in the different time periods
- A link from each policy back to these distinctions and measures.
Adhere to the following standards:
- Your paper should be six to ten pages in length, not including the title or references pages.
- Review the grading rubric, which is found in the Week 8 folder.
- Incorporate at least five scholarly references that are not required readings for this module. The CSU-Global Library is a good place to find these references.
Be sure to follow the APA requirements.
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Explanation & Answer
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Running Head: US FINANCIAL CRISIS
The Remedies to the US Financial Crisis in 2007 and 2008
[Name]
[College]
US FINANCIAL CRISIS
Abstract
The US and the rest of the world in October and September 2008 experienced what could be
summed up as a financial panic. The US took the role of coming up with emergency plans to
stabilize the economic situation. Due to the financial panic and the emergency measures taken,
there was formed a ‘perfect storm’ for a new financial regulation. The prices in real estate were
reducing gradually in late 2007. Investors in the sector started to short the market which signaled
the start of the financial crisis. The crisis in the real estate market continued in early 2008 which
lead to losing billions of dollars in the market. Also, the interbank credit markets went up. The
value of the US banking institutions collapsed such as Fannie Mae and Freddie Mac. This paper
will discuss the strategies laid down by the us government in 2008 to counter the financial panic
that occurred.
Keywords: financial, economic, market
US FINANCIAL CRISIS
The Remedies to the Financial Crisis in 2008
The financial crisis was triggered by the weakened housing market and a fast rise in the
neglecting of subprime mortgages. These neglects led to a breakdown of what the majority saw
as an underwriting standards that were reflected in the process of securitization. The lenders
failed to acquire the confidence of underwriting carefully because they did not want to hold the
loans themselves. Investors expected the prices of the property to rise, according to the
experience from the then-recent past years. The investors also failed to pay close attention to the
ability of the borrowers to pay back the money. Due to the complexity of the securitizations of
the loans, the due diligence of the loans was almost impossible. Most of the banking firms and
other money lending institutions were caught up in the crisis because some crucial parts of the
deal were not deal with well.
The Troubled Asset Relief Program was one of the strategies that were used by the US
government to counter the financial crisis. The TARP was a program that was meant to purchase
the toxic assets and equities from financial and banking institutions within the US to help
strengthen the financial base. The then-president George W. Bush assented the law. The
Emergency Economic Stabilization Act created the TARP program in the year 2008. The
program initi...