When the Bubble Burst

By the time I arrived state side from my second tour in the Middle East the housing bubble had already burst. I noticed a drastic change in the way that many of my friends and family were living. Several of my friends that worked in real estate had sold their boats and seconds houses. My own stock portfolio had lost a third of its value. My sister and her husband had defaulted on their home mortgage leaving them scrambling for a place to live. I saw that greed a huge factor feeding the housing crisis, yet I didn’t know which side was to blame. My sister and brother in-law wanted more house than they could afford, and the bank was willing to lend them more than they should. This crisis sent the government into action to avoid what many were calling the greatest financial crisis of our time. Although many experts suggest an economic depression was imminent without the Troubled Asset Relief Program (TARP) many of the funds were used poorly because the investment banks didn’t acknowledge their risky investments, the funds should have directly helped consumers hurt by the mortgage crisis, government financial relief efforts have had a minimal effect on the economy.

The Troubled Asset Relief Program was created during the financial crisis of 2008. The programs purpose was to buy bad assets from banks in the form of a low interest loan and transfer ownership to the federal government in an attempt to unfreeze credit and create liquidity. In return the government received non-voting ownership of the assets plus interest on the loan. The bad assets were a large number of mortgages and consumer loans that were converted into bonds that were backed by real estate or other property, another words if the borrower defaulted on their loan,...

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...nity. It has sweeping consequences that are still lingering. The economy should recover from this financial crisis, yet it has come at great cost. Many in finance are looking for new avenues of investment and looking for the next big thing. Many get greedy and repeat the cycle of the previous generations failures. Not many in finance take these lessons to heart even when they come at a great price, and the government bailing them out won’t help. Until our government and our banking system acknowledge these faults the cycle of bubbles inflating and popping will continue.

Works Cited

Boskin, Michael. "Time for Plan B?." International Economy 23.3 (2009): 44-45.

Business Source Complete. EBSCO. Web. 13 Sept. 2011.

Lewis, Michael. The Big Short: inside the Doomsday Machine. New York: W.W.

Norton, 2011. Print.