The Financial Crisis Of 2008

One of the recent pieces of legislation authored by Royce West is the Texas State Senate Bill 121 (TX-SB121) which relates to businesses that let people with bad credit borrow money in exchange for things such as titles etc. This bill was introduced to the Texas Senate on November 10th of 2014. The proposed bill was created in order to limit those “payday” lending

A survey of 37 economists conducted by the University of Chicago in 2014, for example, found that nearly all believed that without the stimulus, the unemployment rate would have risen higher than it did.” In addition to this, President Obama strategized new regulations to protect consumers and to prevent another financial crisis. In 2009 and 2010, he signed the Credit Card Accountability Responsibility and Disclosure Act, the Dodd-Frank Wall Street Reform and the Consumer Protection Act into law. The CCARD Act restricted and obligated interest rates on credit card companies and obligated them to enact transparent policies. The Dodd-Frank created the Financial Stability Oversight Council and the Consumer Financial Protection Bureau which could disintegrate banks if it was possible to fail for any reason including but not limited to subprime loans.

The Trump administration is closely monitoring the roles of independent regulatory agencies since the president signed the executive order to reduce the regulatory burdens created by Dodd-Frank. Since many people consider the CFPB an independent agency, several student loan debt holders are left to wonder if a federal agency will exist to help protect them from predatory lending practices.

On October 3, 2008 President George W. Bush signed the Emergency Economic Stabilization Act of 2008, otherwise known as the “bailout.” The Purpose of this act was defined as to, “Provide authority for the Federal Government to purchase and insure certain types of trouble assets for the purpose of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, to amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes” (Emergency Economic Stabilization Act). In my paper I will explain and show the relationship between the Emergency Economic Stabilization Act of 2008 and subprime lending, the collapse of the housing market, bundled mortgage securities, liquidity, and the Government 's efforts to bailout the nation 's banks.

The Federal Reserve System is the most powerful institution in the United States economy. Functioning as the central bank of the United States, acting as a regulator, the lender of last resort, and setting the nation’s monetary policy via the Federal Open Market Committee, there is no segment of the American economy unaffected by the Federal Reserve [endnoteRef:1]. This power becomes even more substantial in times of “unusual and exigent circumstances,” as Section 13(3) of the Federal Reserve Act gives authority to the Board of Governors to act unilaterally in lending and market making operations during financial crisis[endnoteRef:2]. As illustrated by their decision making in the aftermath of the 2007-2008 Great Recession,

The increased pressure on mortgage lenders to be socially responsible and lend to all groups create an opportunity for banks to lend more and charge higher fees to select borrowers who they feel pose a greater risk of default (Palmer, 2015). The primary purpose of the CRA is to assist minorities and lower income individuals from neglect and discrimination. The CRA policy might have forced the banks to implement change to aid individuals who may not qualify for a home loan to be eligible. If the banks did not follow suit with the CRA policies, they might have missed opportunities, such as mergers, acquisitions, and profitability (Elbarouski, 2016). Allen (2011) concluded loose lending led to expanding homeownership in the United States, but lending to riskier borrowers led to an increase in the foreclosure

On May 19, 2015, a hearing in the 114th congress was held. The Subcommittee on Economic Growth, Tax and Capital Access (of the Committee on Small Business) entitled ‘Improving Capital Access Programs within the SBA’, discussed ways to give more money to its veteran entrepreneurs. This would be done by changing the loan process within the Small Business Administration. The House report gives the following testimony from, “a lender authorized to operate in the Loan Program that the initiative would help SBA-guaranteed lenders get needed capital to veterans,” (p.4 HR). This is where the idea was planted and then it was assigned by the speaker, Mr. John Boehner, to the House Committee on Small Business.

To prevent the ban on payday lending in Ohio, FiSCA should pursue a dual strategy of changing public opinion with borrower stories and supporting a compromise proposal based on our industry best practices. Changing public opinion is necessary since the current political environment is anti-payday lending. Meanwhile, the current legislation would not only hurt members, but also sets an unfavorable regulatory precedent; supporting middle ground regulation would prevent this and build FiSCA membership.

Supposedly, Dodd-Frank lacks full implementation, providing President Trump an open door with which to shred the remaining aspects of the Act (Frean 2011). With portions of the Act already ineffective, the only effort Trump has to put into permanent dismantlement, is to ensure that they never go into effect. Interestingly enough, for agencies such as the SEC, FDIC, and CTFC (Commodity Futures Trading Commission) and the like, majority members are cycled out with each presidential term (Dayen 2017). The CFTC prefers a hands off approach and basically ignored the regulatory provisions of Dodd-Frank thereby proving it is not performing as it should (Fischer 2015). So hypothetically, an easy means of controlling the agencies is to control the members,

In 2008, when the financial crisis occurred, millions of Americans were left without jobs and trillions of dollars of wealth was lost wealth. To make sure the Great Recession would not happen again, President Barrack Obama put into effect the Dodd- Frank Act. With the help of this law, banks will not be able to take irresponsible risks that had negative effects on the American people. Furthermore, with the Volcker Rule embedded into the act, it will ensure that banks are no longer allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their

The Great Recession inflicted abundant harm in the U.S. and global economy; 8.7 million jobs vanished (Center on Budget), 9.3 million Americans lost their homes (Kusisto), and the U.S. GDP fell below what the economy was capable to produce (Center on Budget). The financial crisis was unforeseen by millions and few predicted that the market would enter a recession. Due to the impact that the recession had, several studies have been conducted in order to determine what caused the recession and if it could have been prevented. Government intervention played a key role in the crisis by providing the bailout money that saved those “Too Big to Fail” institutions. Due to the amount of money invested in the bailout and the damage that the financial crisis had on the U.S. population, “Too Big to Fail Banks”, and financial regulation are two of the biggest focuses of the presidential candidates. Politicians might assure voters that change will occur, but is it to late for change to be efficient, are the financial institutions making the same mistakes that led to the financial crisis?

“As a result of this movement, the banking laws changed. Congress began to investigate in more depth of the money used to support banks. Eventually Congress changed the level of liquidity of the banks once realizing they were too low.” This movement helped congress recognized a huge flaw in banking services. Also, an act was passed by Barack Obama on July 21, 2010. This act was known as the Dodd-Frank Act. “In the fall of 2008, a financial crisis of a scale and severity not seen in generations left millions of Americans unemployed and resulted in trillions in lost wealth. Our broken financial regulatory system was a principal cause of that crisis. It allowed some irresponsible lenders to use hidden fees and fine print to take advantage of consumers.To make sure that a crisis like this never happens again, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. The most far reaching Wall Street reform in history, Dodd-Frank will prevent the excessive risk-taking that led to the financial crisis. The law also provides common-sense protections for American families, creating new consumer watchdog to prevent mortgage companies and pay-day lenders from exploiting

The financial crisis that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’

The payday advance industry has received a great deal of criticism in recent years. Celebrities such as Sarah Silverman have publicized their opinions of payday loans, and President Obama has called payday advances "predatory." In June, the Consumer Financial Protection Bureau, commonly called the CFPB, released its long-awaited proposed regulations for payday advances and other short-term loans. Despite the vocal attacks on payday loans, a strong argument can be made in favor of leaving the payday advance industry alone.

Trump has also enacted many deregulatory policies that target banking. Deregulations focusing mainly on the Dodd-Frank Act of the Obama administration; President Trump, as of February, has ordered a Congressional Review of the bill. According to Business Insider, Trump has motivation to repeal parts of the Dodd-Frank Act, “I have so many people, friends of mine, that have nice businesses, and they can 't borrow money. They can 't get money from the banks — they just can 't get any money because the banks won 't let them borrow because of rules and regulations in Dodd-Frank” (Chaparro). Revisions considered very possible are those involving “To big to fail” firms, the Orderly Liquidation Authority, and the The Volcker rule.