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Current Crisis - Essay Example

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The crazy lending habits of the banks without assessing the financial capabilities of the loan seekers, the changing life styles of the American public…
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Current Crisis
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Download file to see previous pages Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses. Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes etc’ (Bianco)
The crisis is so deep that only the economic reform policies alone may not bring the desired results. Many economists believe that the current recession may continue longer than anticipated. President Obama has taken lot of measures (Obama program) to counter the current crisis which has been brought mixed reaction from the economic experts. This paper evaluates the criticism raised by CATO Institute, Paul Krugman and Joseph Stiglitz and the support extended by Lawrence Summers to the Obama program.
The American people’s changing life styles are one of the biggest factors for the current crisis. The greedy customers accepted the offers (loans) from the financial institutions with both hands. They have approached the banks for everything and the banks were ready to help them without even assessing their backgrounds or financial capabilities. The financial institutions miscalculated that the global economy will never exhaust and whatever the goods and services sold in the market will bring profit. Such irresponsible allocation of resources in the market was the main cause of the current problem. The banks have given more focus to the goods or services sold rather than the goods or services bought. In other words, they were more interested in selling of their services. They never thought too much about the returns against the services they provided. Once the balance between the services and goods sold and bought were destroyed, financial crisis came into exist. The banks’ decisions and behaviors with respect to lending were not based on the economic theory of supply and demand. The supply must not be ...Download file to see next pagesRead More
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