Preview

Bank Bailout 2008

Powerful Essays
Open Document
Open Document
2686 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Bank Bailout 2008
Bank Bailout Outline

I. Introduction

II. Background

III. Opposition’s point 1, refute, 1st support for thesis.

a. Credit Card Act of 2009

b. No Change at all, Banks still operating the same way

IV. Opposition’s point 2, refute, 2nd support for thesis.

a. Creation of TARP

b. $12.2 trillion dollars of tax dollars were spent wrong

c. TARP allowed many banks to allow credit again

d. A majority of banks have paid back TARP money

e. After TARP, Economy boosted

V. Opposition’s point 3, refute, 3rd support for thesis

a. Toxic assets cannot be removed easily

b. Government takes more cost, then expects

c. Economy will decline with removal of assets

VI. 4th support for thesis

a. Increased national debt

b. Politicians were forced to sign this bill

c. No solving of problems

“Let’s hope we are all wealthy and retired by this house of cards falters” (Bloomberg, 2007). The credit crisis is known as the “House of Cards”, for years the banking industry has transformed many American lives, which has resulted in a troublesome economy. Many factors led to the credit crisis, such as the rise and fall of the housing market, and inaccurate credit ratings helped to create the sub-prime mortgage crisis (Issues & Controversies, 2010). Low interest rates developed easy credit, in which people could get a mortgage and credit cards based on inaccurate credit ratings with the creation of sub-prime mortgages. People have the ability to own a home, with no down payment or fixed income. In August of 2007, the United States began a loss of confidence in securitized mortgages, which resulted in the Federal Reserve injecting $20 trillion dollars into the financial markets to ease the situation (“Obama Sends Warning to Big Banks, 2010). The most important question to be answered in the decade is “How a loss of $500 billion dollars from the sub-prime mortgage resulted in a $20

You May Also Find These Documents Helpful

  • Best Essays

    Subprime mortgages are generally granted to borrowers who cannot obtain conventional mortgages due to insufficient or delinquent credit histories. These borrowers may be forced to take interest-only loan, which have lower monthly payment but are very difficult to pay off in the end. Problems with mortgage financing are the generally accepted cause of the financial meltdown that occurred between 2007 and 2008 (Gorton, 2009). The Subprime Mortgage Crisis, or "mortgage mess" or "mortgage meltdown," was caused by a precipitous rise in home foreclosures that started in 2006 and spiraled out of control in 2007 and 2008. The excessive use of subprime lending during the housing bubble caused an unprecedented foreclosure fallout, the effects of which caused credit markets as well as global and domestic stock markets to face a major financial crisis (Mayer, 2008). The goal of this paper is to address the subprime mortgage crisis, the effects prior to and after the crisis, and discuss who were the biggest players affected by this crisis. Finally, Team A will provide several concepts learned during the course of this class, which may help ensure that something similar does not happen again in the future.…

    • 2391 Words
    • 7 Pages
    Best Essays
  • Good Essays

    Banking Crisis Dbq

    • 146 Words
    • 1 Page

    The depression had given rise to the worst crisis at the time in banking where almost 9,000 banks were shut down in a four year period. Ninety percent of small community banks failed because customers withdrew all the money from their accounts, resulting in massive decreases of the bank’s capital. With only ten percent of small community banks still in business it could be safely said that the banking industry had sunk almost as low as it could get. Clearly the banks were going to be blamed for the economic problems. Congressional hearings in early 1933 revealed huge irresponsibility on the part of these banks, which had used billions of dollars of depositors' funds to acquire stocks and bonds, and had made risky loans to inflate the prices…

    • 146 Words
    • 1 Page
    Good Essays
  • Satisfactory Essays

    | If a country had a rule that required the ratio of debt to GDP to be constant, it would necessarily have to run a surplus if a.…

    • 3359 Words
    • 14 Pages
    Satisfactory Essays
  • Powerful Essays

    Housing Market Crisis

    • 2136 Words
    • 6 Pages

    Jaffee, D. The U.S. Subprime Mortgage Crisis: Issues Raised and Lessons Learned. [online] World Bank. Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/12/01/000333038_20101201234552/Rendered/PDF/577270NWP0Box353766B01PUBLIC10gcwp028web.pdf…

    • 2136 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    Many mid-sized banks with little or no sub-prime exposure and well-managed “capital cushions” were fortunate enough to avoid the burns of the sub-prime mortgage meltdown. However, many stood by nervously as the larger banks took the majority of the write-down body blows. While bankers and business leaders everywhere hope that the worst has passed, the aftershocks have left many with the premonition that the…

    • 2505 Words
    • 11 Pages
    Good Essays
  • Best Essays

    When the U.S. economy began to melt down in 2007 and entered a rapid period of decline in 2008, all eyes were fixed on the subprime mortgage crisis. Though the mortgage crisis, triggered by spurious lending practices and unprecedented risky investment bank practices, was undoubtedly the dominant factor affecting the American consumer in 2008, credit card debt and default was also making a contribution to the deteriorating economy and collapsing standard of living. As the subprime mortgage crisis accelerated, the increasing number of people falling behind on payments or defaulting on credit card debt…

    • 4822 Words
    • 20 Pages
    Best Essays
  • Powerful Essays

    Jaffe, Dwight M (2008) The US Subprime Mortgage Crisis: Issues Raised and Lessons Learnt. Working Paper No. 28, Commission of Growth and Development, The International Bank for Reconstruction and Development/ The World Bank.…

    • 1746 Words
    • 7 Pages
    Powerful Essays
  • Good Essays

    Predatory lending has caused many conflicts in the American society. Victims who fall for predatory lending are usually low income homeowners or those having financial difficulties. Consumers do not realize that mortgage payments are impossible until 3-4 years after predatory lending. This imposes a significant role in the destruction of the American dream. Constance M. Ruzich, a teacher at Robert Morris University in Pittsburgh, and A. J. Grant, also a teacher at RMU, state in their essay, “Subprime mortgages are home loans made at higher rates of interest to burrowers who represent higher credit risks and have lower credit scores.” People with subprime mortgages have a difficult time paying their taxes. Predatory lending, or subprime mortgages, has significantly taken part in the downfall of the economy. Ruzich and Grant say, “Ten years ago, few Americans had heard of subprime mortgages or predatory lending, but by 2008, a survey of economists had identified the effects of the mortgage crisis as the number one threat to the U.S. economy, greater than that of terrorism or conflict in the Middle East.” This statement shows how these lendings have affected the economy at a reasonably rapid rate. The economy of the United States has crumbled at a very accelerated rate like a house on fire. It is no longer what it used to be and in only getting…

    • 1266 Words
    • 6 Pages
    Good Essays
  • Powerful Essays

    The Troubled Asset Relief Program (TARP) is a government program that was legislated into existence in October of 2008 with the passage of the Emergency Economic Stabilization Act of 2008. Emergency Economic Stabilization Act of 2008 provided authority for the Federal Government to purchase and insure certain types of troubled assets from banks. This was done in order to provide stability to and prevent disruption in the economy and financial system of the United States.1 It contains several initiatives. One of the initiatives included within it is the Capital Purchase Program (CPP). Under the Capital Purchase Program, banks received money from…

    • 2807 Words
    • 12 Pages
    Powerful Essays
  • Good Essays

    Since the stock market declines sharply, the people’ wealth are being affected. In short run, it leads to a fall in aggregate demand which would shift aggregate-demand curve from AD1 to AD2. The economy is reached from point A to point B because the output level and the price level would fall from Y1 to Y2 and falls from P1 to P2 respectively.…

    • 897 Words
    • 4 Pages
    Good Essays
  • Good Essays

    American Dream Barriers

    • 659 Words
    • 3 Pages

    culture, one with enduring significance. During the years preceding the credit market collapse in 2008, the subprime mortgage industry thrived. Individuals with bad credit were given access to loans that weren’t supposed to be able to go to them. But as long as home prices were on the rise, these poor lending practices were simply ignored. Lenders could afford to write poorly used loans as long as the homeowner's equity outpaced their desire for new debt. If borrowers were to fail to payback their loans, lenders could always foreclose on the home, since it was an asset with ever-increasing value. The credit market's problems began when housing prices started to fall in 2007. Homeowners frequently found themselves with underwater loans, owed lenders more than the home was worth and when faced with these facts, homeowners began to fear the threat of foreclosure. Even more disturbing was the fact that some families abandoned their homes; choosing to start their lives anew elsewhere rather than worry about paying off their debts. Many Americans had wages lowered, resulting in strike, others were laid off or fired. This caused a major debt in the economy and stunted the growth of…

    • 659 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Manage

    • 2302 Words
    • 10 Pages

    The main causes of the global credit crunch are sub prime mortgage crises in the US. In the US sub prime mortgage market which ‘turned sour by borrowers with poor credit struggling to meet payments as interest rates rise — is fast becoming a global worry. With huge chunks of this debt packaged up and sold to financial companies across the world, bad loans are roughing up banks and markets just about everywhere’(Smith, 2007). Therefore, Sub prime mortgage market was meltdown in USA, it also impact global economics. The sub prime mortgage crisis hits bank sector in the financial market. John Rubino indicates that suffering lost from sub prime mortgage depend on the business model of banks…

    • 2302 Words
    • 10 Pages
    Powerful Essays
  • Good Essays

    Role of Rating Agencies

    • 900 Words
    • 4 Pages

    3. Summarise the recent changes implemented by the Dodd Frank Act, with regards to CRA? –Caylie…

    • 900 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    The phenomenal growth in the US mortgage lending and the securitization of mortgage loans resulted in a spectacular collapse of the residential housing market. During the US property boom, beginning in the early 2000s, banks began securitizing mortgages and selling them in capital markets in the form of mortgage-backed securities (MBS). The demand for high-yield products based on mortgages was so great and bank fees so large that banks and brokers began to even sell mortgages to those who could not afford them. Consumers and financial institutions amassed very high levels of debt. The whole process was driven by accelerating leverage.…

    • 2114 Words
    • 9 Pages
    Powerful Essays
  • Powerful Essays

    Generally there are many different solutions and actions that should have been taken during the crisis, such as liquidity support or policy changes, that will mostly prevent the crisis. But in this paper we will discuss how to deal with major issues in restructuring financial institutions and resolving bankrupt banks after a major crisis and the situation is more or less stable in banking system. But of course…

    • 1916 Words
    • 8 Pages
    Powerful Essays