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Economy recession - Assignment Example

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The banking industry had received a blow in the form of the disintegration of Lehman Brothers. The housing and auto industries were subsequently affected…
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Economy recession
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Running Head: ECONOMIC RECESSION The Great Economic Recession of 2008-2009 and US Policies Institute The Great Economic Recession of 2008-2009 and US Policies
The US economy was faced with a massive economic crisis during 2008 and 2009 with major industries facing a collapse. The banking industry had received a blow in the form of the disintegration of Lehman Brothers. The housing and auto industries were subsequently affected. Rigorous policies were made and implemented by the policy makers which have received severe criticisms, yet they have proved to be priceless as no one has been able to adequately quantify the results of the converse.
The US policies were spread over two dimensions: to stabilize financial system and to control recession. The former was achieved by formulating monetary policies which included lowered interest rates (as low as 0%), heavy purchase of Treasury bonds and mortgage securities and liquefaction of credit for financial markets and institutions. The deposit insurance limits for financial institutions were increased and comprehensive stress tests were conducted to ensure the stability of the existing institutions. TARP (Troubled Assets Relief Program) was launched in 2008 to navigate finances back into the banking institutions (Blinder and Zandi, 2010). These efforts ensured that the existing institutions were strengthened to face dire circumstances and that the financial system of the country was saved from its looming demise.
Attempts were also directed towards the control of recession through policies. Several middle and lower class tax payers were granted with rebates, ARRA (American Recovery and Reinvestment Act) was passed and several small stimulus measures were inducted. The deteriorating condition of the housing sector was rescued by reducing mortgage rates, providing of legal and larger loans, granting tax credits for homebuyers and through the bail-out services of TARP. The auto industry was also saved largely by TARP funds which revived the three major auto companies of US and the world (Blinder and Zandi, 2010). Even though the federal budget was highly strained in process, a recovery in the economic downfall and a change of course towards economic growth was achieved.
It took two administrations, the Federal Reserve and the Congress to pull US out of its deteriorating economic conditions (Blinder and Zandi, 2010). Their policies are highly criticized as these had exerted immense strain on the Federal Reserve and the US Budget. Nevertheless, it is highly possible that the US economy would have been largely demolished if such aggressive actions were not taken.
Reference
Blinder, A. and Zandi, M. (2010, July 28). How The Great Recession Was Brought To An End. Retrieved from http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf Read More
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