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2008 Financial Crisis Essay

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between 2001 and 2006. By 2007 it had grown into a 1.3 trillion industry.” Cheap mortgage rates and ease of borrowing created a demand for mortgage which in turn created a demand for home building. By 2005 an asset bubble was created in real estates. The bubble busted by 2007 due to multiple increases in the Fed funds rates. House prices started falling uncontrollably causing banks to panic and stop leading. A down spiral began that send the entire economy into a recession.
When the economy came crushing to its knees the United States government in an attempt to stabilize the economy unjustly started using tax payer’s money to provide financial assistance to the multimillion corporations that were failing. The first assistance package was …show more content…

Quantitively easing allowed the U.S central bank to purchase billions of agency debt and mortgage-backed securities in order to lower interest rates and increase the money supply. The use of quantitively ease was so extensive and prolong that it had a significant impact on redistribution of wealth in the United State. Quantitively ease started in 2008 when they purchased approximately $100 billion of agency debt and another $500 billion of mortgage-backed securities. In 2009, the Feds used $850 billion to continue with the quantitative ease program and they used an additional $300 billion to purchase longer-dated treasuries. In November 2010, the Feds announced the Quantitively ease 2 (QE2). In these new phase the federal government agree to purchase $600 billion worth of longer-date treasuries by mid-2011. Additionally, in 2011 the Feds purchased $400 billion worth of treasuries with maturities between 72 and 360 months in an operation they called Operation Twist. In 2012, the Feds announced the third batch of quantitative ease purchase. They agree to spend $40 billion per month in mortgage backed securities. These running along with operation twist would account to $85 billion worth of long term purchases. It was finally agreed to reduce the quantity by $10 billion going forward in December 2013 and

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