Solving the Foreclosure Crisis

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In order to figure out how to solve a crisis, you need to first figure out the steps and factors involved that led to the problem to begin with. Once those steps and factors are laid out, then the work begins to ensure that history does not repeat itself and those hard lessons learned can be used as teaching tools for those in charge of problems that arise in the housing market in the future. One of the many benefits of pursuing a college degree would be the knowledge gained about the economy and how poorly planned past actions has created the current foreclosure crisis. I am taking a finance class and we are discussing this subject so it is fresh in my mind. There were multiple origins that initiated and worked hand in hand in order to lead up to the current financial crisis that we are in now; hence the foreclosure crisis. One huge problem was the extremely relaxed monetary policy that was not being enforced amongst most American banking institutions. The agencies that are in charge of regulating the financial institutions were not doing their job someone decided that there was no need to regulate during an economic boom for fear of stifling economic growth. Another lending practice used by banking institutions involved lending money with an interest rate that was too low. The combination of easy credit and low interest rate, created the desire and demand for investments in the real estate market. This demand drove up the price of houses on the market very high. Along with the wise real estate investors, came the new uneducated group of homeowners who should not have became investors. Those same groups of uneducated homeowners were people who were purchasing homes that they clearly could not afford and signing contr... ... middle of paper ... ...orth more than 5 million dollars a year in profit can no longer file bankruptcy. These large companies must reorganize their finances and negotiate the debt with their creditors. All debts must be repaid with terms and rates to be negotiated between the large company and those to whom they own money. These large companies who claim that they are ‘too large to fail’ will be indeed not allowed to fail. Large companies must be responsible and held accountable and it should not be allowed to where the average taxpayer gets left on the hook for large business financial blunders. If new regulations are implemented and actually enforced, most to all the rules were followed, and some form of safety net, such as asset insurance, for all those involved in the first place; then maybe there will not be such a foreclosure crisis that exists now to happen in the future.

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