Introduction: The Crisis of 2008 and Financial Services Regulation
Introduction: The Crisis of 2008 and Financial Services Regulation
This chapter discusses the 2008 crisis and its impact on the U.S. economy. First, the chapter takes the task of diagnosing the causes that brought about this crisis. Some authors give due cause to government actions, where the keeping of low interest rates which increased expansion of homeownership, which brought on bank losses from 1-4-family mortgages. Others take note of the inconsistency of government policy in response to the crisis that contributed to its intensity, such as the failed attempts to regulate mortgage originations. Another element that possibly contributed to this crisis was the belief in a stable macroeconomic policy that was capable of sustaining economic growth without inflation. The view was that inflation had been tamed because of nearly 30 years of consecutive low-single-digit inflation and unemployment was at historically low levels since the 1981–82 recession. Finally, the chapter gives several prescriptions or recommendations for solutions to the economic crisis.
Keywords: low interest rates, 2008 crisis, expansion of homeownership, 1-4-family mortgage, government policy, regulate mortgage originations, macroeconomic policy
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