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Essay / Research Paper Abstract
A 3 page paper that comments on the current financial crisis and how the government's regulations were a contributing factor. The wrier also comments on which is worse, inflation or recession and why. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: MM12_PGecrsf9.rtf
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Unformatted sample text from the term paper:
has to do with government regulations. Different laws and regulations acted as a cushion for unethical bankers and home mortgage lenders to push sub-prime mortgages on people who never should
have been approved for a mortgage in the first place because they did not have sufficient income to make the payments. Fannie Mae and Freddie Mac were required by the
federal government to take cover these sub-prime mortgage loans (Powell, 2009). This was after the severe fraudulent practices were found at places like Enron and WorldCom (Powell, 2009). New regulations
were adopted but they did not really protect the taxpayer and investor from any number of fraudulent accounting practices and bad decision making. Power (2009) alleges that we are in
this financial economic mess "largely because critical thought and moral judgment have been subordinated to the politicization of our economy, resulting in regulatory gaps and excessive controls of the wrong
kind" (p. 43). All culprits, Congress, bankers, credit lenders, mortgage lenders. Wall Street, and even some consumers failed in moral judgment. And, now the American public has lost trust in
all of them. When trust is lost, markets freeze and industries stagnate. Government programs and regulations shifted the moral responsibility away from individuals and institutions to the governments programs
(Powell, 2009). Consider FDIC which now guarantees deposits up to $250,000. That means if the bank fails, the government covers individual and institutional deposits up to that amount. That leaves
very little incentive for banks and other approved lenders to act not only legally but morally. One of the actors is the Federal Reserve Bank. When the fed wants to
avoid inflation or counter a recession, they reduce the prime interest rate. That refers to the interest rate bankers and other approved entities pays back to the fed. That is
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