Essay about Economic Crisis in 2008

Submitted By Louielevey
Words: 1322
Pages: 6

The economic crisis that began in 2008 has been an issue that has been spoken about repeatedly during the presidential campaign. The presidential candidates practically begged for votes, promising a shortened unemployment line and an increase in spending. There have been plenty of United States citizens who have felt the anguish of the recession, lost their jobs, and longed for answers to end the days of penny pinching. Nearly everyone has been affected by this recession. Business owners have seen their profits diminishing as less and less people buy goods, choosing to save their money rather than spend it. Customers have watched as restaurants, nightclubs, and various other businesses struggle to stay afloat. Due to the easy access of credit, the United States money flow became a trickle. This slowed down new economic growth and the buying and selling of assets. Businesses, individuals, and banks felt a huge impact. Many of the banks were left to hold mortgage backed assets that had dropped so low in value that they weren’t bringing in the money needed to pay for the loans. This caused the banks to restrict their credit and ability to distribute new loans. Cheap credit also played a large role in the economic crisis. It became too easy for an individual to buy a house or make other investments that were based on nothing but speculation. This created more money in the economic system and people spent that money as if it would never run out. Eventually, the multitude of individuals who were given cheap credit loans weren’t able to pay them off, causing a huge crash in the economic system. As a result of this economic crash, banks had to make stricter policies when giving out loans. This made getting a loan a long and grueling process for the average working American. Most banks were not so fortunate, and they had to be bought out due to the loss of money from borrowers who couldn’t afford the credit loans. Everyone wanted to buy property and invest in the same thing, increasing the demand and creating inflation. Private equity firms took on billions of dollars of debt, purchasing companies and creating extreme amounts of wealth by juggling paperwork. By doing so, they had not created any value in their companies. This caused higher oil prices and higher unemployment as well. On February 13, 2008, President Bush passed a stimulus package to fight this economic down turn. Originally, it was an Act of Congress that included several stimuli intended to boost the United States’ economy and carry the country out of the recession. The U.S House of Representatives passed the stimulus package on January 29, 2008. After being changed slightly, the U.S Senate passed it on February 7, 2008. That same day, the version given to the Senate was approved by the House. On February 13, 2008, with the support of both Democratic and Republican lawmakers, President Bush signed the stimulus package into law. The law gives tax incentives to low and middle-income U.S taxpayers to stimulate business investment. Also, it increased the limits placed on mortgages able to be bought by government-sponsored enterprises. In 2008, tax incentives created by Bush’s law were paid to U.S taxpayers. Rebates of at least $300 per person, $600 for married couples that filed jointly, were received by most taxpayers. Eligible taxpayers received an additional $300 per dependent child under the age of 17. The payment could not exceed $600 for a single person or $1200 for a married couple filing jointly. As well as this, the payment was equal to the payer’s net income tax liability. In response to the subprime mortgage crisis, lawmakers raised the limits on conforming mortgages eligible for government insurance and GSE purchase. By late 2007, the subprime mortgage crisis resulted in a widespread credit crunch. The lenders would now have reluctance to issue jumbo mortgages for the buying of houses that exceeded the FHA and GSE limits. House prices had been placed