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United States Bail-out of Banks - Case Study Example

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This has been done despite the White House's initial rejection of such a plan for homeowners who could be facing foreclosures, banks and mortgage companies which participated in the creation of the problem…
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United States Bail-out of Banks
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United States Bail-out of Banks

Download file to see previous pages... Many public and quasi public institutions are therefore dispensing huge amounts of money quietly to financial institutions which are saddled with almost worthless mortgage securities. Unfortunately, many homeowners who are actually at the core of the problem have been left out of the equation. The central bank on its part has implemented a process for auctioning that makes it cheaper and easier for cash-strapped mortgage institutions and banks to borrow from the government.

While some economists have argued in favour of the bail-out plan, an almost equal number have argued that the move will not save the country from its economic downturn as the country's economy continues on its way towards a deeper recession. Proponents of this move argue that without the institution of such measures to rescue banks and mortgage firms, the recession would most probably get longer with a potential for developing into a depression.

Immediately after the announcement of a tentative bailout plan, data showed rising unemployment, a hunkered-down consumer and declines in business spending. The biggest challenge however is the tight credit market after WaMU (Washington Mutual) bank collapsed - the largest bank to fail in the country's history. The government's bail-out plan involves the release of a stimulus package that includes a proposal to allow some companies purchase mortgages worth up to 730, 000 US dollars.

Others argue that without capital injection from private businesses, banks and other financial institutions will find it very difficult to continue loaning, and the economy will not be able to grow. Analysts predict that it could take up to four years for banks to recover from their losses with the economic slowdown expected to continue into 2009. The government's lending operation according to others will prevent mortgage companies from collapsing but will not in any way solve fundamental problems that face the housing sector.

The United States' government bail out of banks has been an issue of great controversy. It is an issue that has received much attention in the media with strong opinions being voiced in its favour from some quarters and against it in other quarters. Given that different groups and individuals have different views regarding this program, it is necessary that an analysis should be performed using a representative sample to accurately determine the general attitude of citizens regarding the move.


The attitude distribution of a group of respondents on a particular issue can be represented as a frequency distribution (Armitage and Conner, 2001). In this case, the baseline represents the entire range of views with one end comprising those who strongly favour the issue while the other end comprises those who are against it in similar measure. Between these two extreme ends on the baseline will be a neutral zone that represents of indifferent attitudes on the particular subject under study. The ordinates of the distribution will be a show of the popularity of each attitude relative to the others.

Louise Thurstone developed one of the first theorists to develop a productive measurement scale (Armitage and Conner, 2001). He invented three distinct methods that can be used in the development of a one-dimensional scale. These included the method of paired comparisons, method of successive intervals and the method of equally-appearing intervals. While scale values are constructed differently for each of the above methods, the scales that are developed are similarly rated by ...Download file to see next pagesRead More
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