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Regulatory Interventions in the 2008 US Post-Economic Crisis - Assignment Example

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The US Financial Crisis has dragged the economy with its high unemployment rates since the time the economic recession began in 2008. A key expected solution for faster recovery has been high employment…
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Regulatory Interventions in the 2008 US Post-Economic Crisis
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Download file to see previous pages However, there is a need to generate productivity following the series of Stimulus Funds in order to multiply the capital infused in trillions of dollars. Or the economic recovery will be transient and may return to perform another economic recession, right after funds are consumed. Regulations spearheaded by the Dodd-Frank Act are meant to make the financial institutions and big corporations more careful in their risk management. Such regulations were found to be critical after deregulation was given a chance to work for over 30 years and yet failed with its grandstanding recession. The question remaining is how funds can be effectively channelled to entrepreneurs given the past experiences wherein a greater part of the Stimulus Funds never reached the Small Business Entrepreneurs (SBEs) who can use capital to generate more productivity, hire people, and earn profits. Most of the Stimulus Funds went to social welfare and large corporation bail outs. Further study is required to evaluate the possibility of reinstating the Glass-Steagall Act for the purpose of further regulating the banks to focus on diligently supplying funds to SBEs and supporting those SBEs with sufficient guidance in order to earn successfully. This can logically stop the banks’ vested interests on Investment Portfolios since they will not be allowed to engage in other investment activities except to lend entrepreneurs what they will need in order to progress. I. Introduction Right after the economic recession declared by the National Bureau of Economic Research (NBER) to have lasted December 2007 all the way to June 2009, the phenomenon was described as not only “the longest and deepest recession of the post-World War II era” but also the “largest decline in output, consumption, and investment, and the largest increase in unemployment, of any post-war recession” (Labonte, M. 2010, p.2). Stimulus funds from the Federal Reserve worth more than a Trillion Dollars along with the monetary policy of maintaining almost zero interest rate, facilitated the recovery. $700 billion, which was later reduced to $ 470 billion infused into the financial system was done via a program called Troubled Assets Relief Program (TARP) in October 2008. The US Government purchased real estate properties that lost their values as a result of the recession, for the purpose of adding some liquidity to the banks. As of mid-2012, most programs under the TARP were reported closed. Major beneficiaries rescued were Fannie Mae and Freddie Mac, AIG, Citigroup, and Lehman Brothers of the financing sector, and later included General Motors and Chrysler of the automobile sector. Saving the giant enterprises reduced the need to retrench and lay-off employees. However, there were economic ...Download file to see next pagesRead More
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