2008 Great Recession study

Document Type:Thesis

Subject Area:Economics

Document 1

The recession found when there was a boom in the United States market. The economic caused collapsing of institutions especially those dealing with finance like the banks, as a result, there was a huge number of joblessness in the US.  (Cúrdia, et al.  1047)This paper will, therefore, analyze the causes, consequences and the remedies which were applied to save the situation during the time of economic recession. Causes of the recession One of the causes of great recession was Deregulation. Deregulation began as early as the 1960s but its long effects were felt in the year 2006 during the financial crisis. (Arestis and Karakitsos 37) It started with a primary aim of boosting completion with foreign banks. This led to the failure of banks over the years from 1960 to 2008 where bank failure was at the peak.

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Securitization is one of the causes of the 2008 financial crisis though it never played a bigger role in the crisis. It led to the transformation of banking by causing depersonalization of the loan process. Credit rating agencies also had a hand in the 2008 financial crisis. Originally payments of the ratings of potential investment were done by the investors but this was never the case when it reached the 1970s where the person issuing the bond would be the one paying the rating agency. Earlier before banks in the US were only allowed to do investments in bonds that were safer and speculative investment was illegalized. At this time banks were allowed only to buy securities which their ratings were done by BBB or the ones which came from agencies that are recognized.

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The mistakes that were made by the agencies literally led to the financial crisis of 2008. Political instability was one of the effects of the economic recession where Greece was involved in civil unrest and during this period there was a massive strike among the workers. The economic situation led to the closing of schools and at some point airports were shut down and several services were interfered with in Greece. (Kumkar 13) Iceland was forced to go into an election two years earlier due to continuous mass rioting where the people blamed the government on how they handled the economy problem. In France, there were also protests against the then presidents on the economic policies he introduced. Remedies. This protects the taxpayers.

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During the crisis, the institutions which threatened the economy could be saved by the policymakers who could chip in when the institutions were in crisis and bail them out. Eliminating bailouts will create another option and this will be the work of resolution authority which is in a position to bring to an end an institution which is undergoing serious financial troubles.  (Cúrdia, et al.  1046) In this mechanism, wiping and firing should be done to the shareholders and management respectively. When these other countries are regulated then it comes easier because financial institutions are interconnected and work together with foreign countries. Protection of consumers is another remedy which is adopted in solving the secession crisis. This is done by creating an institution that helps in protection of consumers and the institution should come up with rules and the authorities that enforce these rules.

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