The Political Response to the Economic Crisis of
2008
William Kope
ECN400 – Managerial Economics
Colorado State University –
Global Campus
Dr. Frederic Bouchet
April 29, 2015
Objectives
• Identify the history of economic crisis
• Reveal the cause and effects behind the crisis of 2008
• Identify the governmental measures enacted to stabilize the economy
• Review short and long term impacts
• Measures of economic success over time American Economic Crisis
*Creamer, 2015
*Havemann, 2015
• Global economic decline
• Greatest decline in American history since the
Great Depression
Causes and Effects of the 2008 Crisis
-O’Toole, 2013
-
.
U.S. Housing Market - Foreclolsures
Mortgage Backed Securities
Lending Practices
Impacts to Banking
Ripple to Other Businesses
Governmental
Intervention
– ARRA (American Recovery and
Reinvestment Act)
– TARP (Troubled Asset Relief Program)
– CPP (Capital Purchase Program)
– HERA ( Housing Economic Recovery Act of
2008)
• Freddie Mack/Fannie May
ARRA
• $787 billion
– Jobs
– Growth
– Transparency in Spending
-Ohio DOT, 2015
TARP
•
Troubled Asset Relief Program
– Wide Span
• Auto Industry
• AIG
• CPP
• Housing
• Executive Compensation
CPP
• Capital Purchase Program
– Purpose
• Stabilize the financial system
• Provide capital to financial institutions of all sizes • Control spiral effect of the financial crisis
-Treasury.gov, 2015
HERA
Housing and Economic Recover Act
• Address subprime borrowers
•$300 billion
•Fannie May and Freddie Mac
•Federal Housing and Finance Agency
FHFA.gov, 2015
More Government Intervention
– Dodd-Frank Act
– Financial Stability Oversight Council
– Fed Rates
Bersak, 2015
Short Term Impacts
•
•
•
•
•
Immediate relief in lending/bailouts
Reduced interest rates
Saved Jobs
Stock market
Increased business activity
Safety Orientation
11
Long Term Impacts
• Significant Budget Deficits
– Inflation
– Currency Devaluation
• Low Interest Rates
– Inflation
• Unemployment rates
Safety Orientation
12
References
– Bersak, D. (2015). Government regulation of industry. Retrieved from http://ocw.mit.edu/courses/economics/14-23-government-regulation-of-industryspring-2003/ – Creamer, H. (2015). Peace, love, and Mrs. C. Retrieved from http://heathercreamer.weebly.com/great-depression-webquest.html – Census.gov. (2011). Median and average sales prices of new homes sold in the United States. Retrieved from http://www.census.gov/const/uspriceann.pdf.
– Congressional Budget Office. (2013). Report on the troubled asset relief program –May 2013. Retrieved from https://www.cbo.gov/publication/44256
– Exexutive Office of the President Council of
