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An Integrated Solution to the Foreclosure Crisis Essay

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Foreclosure. Only recently has the term become a buzz word among the American public and various media. The crisis that has enveloped the United States has initiated widespread questioning of the very financial systems in which the American innovators have grown to prosper. Although the foreclosure crisis is often viewed as a product of greedy financial institutions, causation cannot be distilled to individual constituencies; further regulation on various components of the crisis can develop the preconditions for recovery, but 2009 has elucidated a stunning reality: the American financial system possesses an independent resiliency that is currently rebounding and developing recursive and futuristic solutions with minimal exterior …show more content…

In response to the crisis, the government has taken a series of actions in an attempt retain the solvency of integral financial institutions and to stem the massive explosion in home foreclosures. The primary tool the government regulatory bodies have taken, is initiating an artificial injection of liquidity into the marketplace. In any case, it was a motion absolutely necessary in the solution. The only method of clearing poor assets is to realize the loss as quickly as possible without causing the system to fail. When a foreclosure occurs, the tangible asset becomes that of the bank; the bank immediately intends to sell this asset on the market place. However, when this phenomenon occurs in massive quantities, the market is flooded with supply, driving prices down to a level necessary to stimulate enough liquidity to stabilize the price. Liquidity absorbs these toxic assets and is the component absolutely necessary in solving the foreclosure crisis. So if the principles of supply and demand suggest a self correcting system, would a laissez-faire approach be effective in solving the foreclosure crisis? The answer is a resounding yes. However, if one so desires quicker recovery, some minor actions can be taken. To the credit of the lawmakers that took immediate action at the helm of the financial crisis, nearly all feasible actions have been taken to aid the recovery. As previously

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