Ben Bernanke Recommendation Essays

Submitted By Kadeem-Jamaal-Bobcom
Words: 705
Pages: 3

While I respect Ben Bernanke’s approach to the Financial Crisis of 2008 to 2009, there was a better way to handle the situation. In order to understand this different plan, one must read this from the lens of a 2008 U.S citizen. This comes in the form of a 5 point fast recovery plan. The overarching idea to all of this is to, STOP THE BAILOUTS and FIX THE BANKS. The goal is to solve the loan issue, fix the derivative dilemma, and reassemble whole loan mortgage. In 2008, the US economy was shrinking quickly because businesses could not get the loans that the needed to optimally function. Lenders and Bankers had accumulated billions of dollars in bad loans and were afraid to give out any more. In response to this problem, the US government gave them billions of dollars in bailout money, but banks ended up keeping it for themselves. As a result, our financial system was seen as deceitful because there was a mixture of bad loans with the good ones. Banks did not trust ANY loan, and the credit market stopped performing properly. The U.S bank continued to shrink until the bad loans could be straightened out. Once the bad loans are weeded out, they could be dealt will accordingly. Through this action, trust would be redeemed, credit would flow seamlessly, and the economy would expand. Out of political views and sheer ignorance, the government was spending trillions of dollars on “pork projects” and bailouts. Pork projects are defined as, spending which is intended to benefit constituents of a politician in return for their political support, either in the form of campaign contributions or votes. This was not the first financial crisis that the U.S has experienced, and the problem was remedied previously. A better fix was possible, which is involved in the plan.
One must start with the Resolution Trust Corporation, which was created by the Federal Government to solve and settle a saving and loans problem back in the 1980’s. RTC should buy up securitized home loans that have been packed into large groups to be sold to investors. If roughly 4000 mortgages are compiled, securitized and sold like a stock. Government also should have reassembled whole loans from securitized mortgage components and derivatives. They could have used traditional mortgage experts and get lines in order to package home loan into quality groups. Then government should sell those reassembled whole loans to common mortgage banks. This resolved the problem or renegotiating home loans with homeowners. The law would need to be altered so that home loans could not be securitized into derivatives or it would continue the negative cycle that caused the issue in the…