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Great Recession of 2008
Chapter 1 touches briefly on the Great Recession of 2008. We could easily dedicate a full week of material to this topic as there were numerous players and underlying causes for the crisis. We don't have an extended amount of time to focus in on this subject, but a brief mention in the textbook isn't sufficient either, especially since we are still dealing with the consequences years later.
The common causes cited for the Great Recession are a lack of financial regulation (or deregulation), an 'easy credit' environment, and subprime mortgages. These were players, but there were many other events in the early 2000's that many people contend also contributed significantly to the crisis. Some of the lesser known issues were:
1) Decline of the US Dollar
2) Flow of international savings into the US (globalization, trade imbalance)
3) Increase in commodity prices such as oil and food
4) Expansive monetary policy under Alan Greenspan (Fed Chairman at the time), which was a response to the early 2000's economic recession
5) Affordable housing policies (laws/regulations aimed at increasing home ownership for lower and middle income families)
6) Credit rating agencies (Moody's, S&P) and inaccurate credit ratings (for the mortgage backed securities packaged and sold to the secondary market)
7) Consumer mortgage fraud (borrowers falsifying applications for loans, such as over-stating income)
8) Consumer housing speculation (buying for investment purposes, or 'flipping') or excessive risk taking
9) Financial engineering: Credit Default Swaps, Collateralized Mortgage Obligations, Collateralized Debt Obligations
ASSIGNMENT: The list above is not all-inclusive and there may be overlap between some, but for this week's assignment, select ONE of these issues as a basis for your research. Identify for me at the top of your paper which one (1 - 9) you are writing about.
Utilizing at least two sources (articles, journals, websites), summarize in your own words (do not use direct quotes) why this ONE issue may have contributed to the Great Recession of 2008. In addition, briefly discuss whether you think this issue was in fact a significant contributor to the crisis.
Submit your write up in a typed single-spaced Word document of between 3/4 to 1 page. (No more than one page)
Also list your sources.
Great Recession of 2008
Chapter 1 touches briefly on the Great Recession of 2008. We could easily dedicate a full week of material to this topic as there were numerous players and underlying causes for the crisis.