introduction The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking (Zandi, 2008). Additionally, expert analysis on the 2008 financial crisis assert that the cause was also due to erroneous monetary policy moves and poor housing policies. The federal government encouraged the expansion of risky mortgages to under-qualified borrowers. Congress pushed for the support of affordable housing through extended procurement of non-prime loans for applicants with low income (Zandi, 2008).
Wall Street Journal. November 24th, 2008. Joint Statement by Treasury, Fed, FDIC on Citi http://blogs.wsj.com/economics/2008/11/24/joint-statement-by-treasury-fed-fdic-on-citi/. Wall Street Journal. February 3rd, 2009.
There was and still is tremendous turmoil amongst the Wall Street mammoths and the drama is certainly no longer entertaining or cheap. The tax consequences from these economic failures are difficult to measure. However, Washington Post’s Steven Pearlstein estimates that “falling stock prices will cause companies to reduce their hiring and capital spending while governments will be forced to raise taxes… as revenue from capital gains taxes decline.” Furthermore, “the combination of reduced wealth and higher interest rates will finally cause consumers to pull back on their debt-financed consumption.” Congress and the Bush administration passed an economic stimulus package on February 13, 2008 and the U.S. Federal Reserve cut interest rates in hopes to address and mitigate liquidity and credit problems. The stimulus package includes tax rebates to low- and middle- income U.S. taxpayers of $300 per person and $300 per dependent child under the age of 1... ... middle of paper ... ...ve further research and evaluations are needed to decide on which candidate really has the better tax plan for the United States as a whole. Works Cited "Economic Stimulus Act of 2008."
Equilibrium: Government Intervention with Markets. Retrieved January 27, 2008 from http://www.sparknotes.com/economics/micro/supplydemand/equilibrium/section2.rhtml
In an article for the journal Housing Studies, Dan Immergluck and Geoff Smith of the Georgia Institute for Technology claim that areas with high foreclosure rates have been repeatedly known to foster crime and discourage community growth (855). This speaks nothing of the personal shame, embarrassment, and personal risks normally associated with losing a home. Yet the evidence suggests that the real issue of the conflict lies in the homeowner’s inability to modify the terms of their agreement with the mortgage company. According to the US Judiciary System, Chapter 13 of declaring bankruptcy was created to reschedule debts “other than a mortgage for their primary residence” (“Bankruptcy Basics”). This is a special provision given to mortgage companies under Chapter 13.
Guide to Congress (6th ed., Vol. 1). Washington, DC: CQ Press. Retrieved from http://library.cqpress.com/ congressguide/g2c6e1-972-36475-1841992 Election of members: Evolving process. (2008).
But did the CRAs really deserve blame or were they being held as scapegoats? In the past the agencies generally avoided significant criticism for their rating of corporate debt and government issues, but their role in the burgeoning structured finance market in the early 2000s was characterized by conflict of interest issues, poor risk modeling and ineffective government regulation. As a result low quality ratings proliferated the mar... ... middle of paper ... ...s Research Paper Series Research Paper No. 07-46, 59-99. Renault, Olivier and Arnaud de Servigny, 2002, Default Correlation: Empirical Evidence, Staff report, Standard & Poor’s Rosner, Joshua, 2007, Stopping the Subprime Crisis, The New York Times, Online Edition, July 25.
International Monetary Funds. Retrieved April 27, 2008 from, < http://www.imf.org/external/np/exr/ib/2000/062300.htm#III > 8. Krueger, Anne. (June3 2004). Promoting International Financial Stability: the IMF at 60.