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Topic: essay econ 2 exam

Order Description

Please read the timeline of events below.

Current events regarding banks and regulations

• http://www.huffingtonpost.com/2014/08/05/too-big-to-fail-living-wills_n_5652769.html

• http://dealbook.nytimes.com/2014/07/19/in-a-subprime-bubble-for-used-cars-unfit-borrowers-pay-sky-high-rates/

• http://economistsview.typepad.com/economistsview/2014/05/are-banks-too-large.html

• http://www.nytimes.com/2014/08/03/business/big-banks-still-a-risk.html?emc=eta1

1. Why did the Federal Reserve decide to lower interest rates in the early 2000s; thus, making money easily and cheaply available? Explain this in terms of economic

concepts of supply and demand.

2. What is the definition of a housing bubble (research definition?) Why did the value of houses increase prior to 2008? Remember, the reason why house prices rose

is multi-faceted. Include all reasons.

3. What are sub-prime loans? Why did banks sell their sub-prime mortgages? What is happening now with subprime loans?

4. Why did the housing bubble burst? Again, a multi-faceted answer.

5. Define collateralized debt obligations? Who sold them and who bought them? Why did people/banks/governments/investors want to buy these financial investments?

6. The problem came when credit dried up, banks failed, businesses stopped. Watch the above video. Describe the domino effect of bank failures. Who failed.

Explain the concept of “too big to fail.”

7. Why did the Federal Reserve decide to intercede? What did they do?

8. At the time of the initial bank failures, who was the chairman of the Federal Reserve, who was the head of the Treasury, and who was our president?

9. GREED, POOR OVERSIGHT AND LACK OF RESPONSIBILITY CAUSED THE RECESSION OF 2008 – WHO WAS GREEDY, WHO DIDN’T REGULATE. List all parties that were greedy

10. Briefly discuss three ways the government intervened or at least wanted to intervene. See PowerPoint, “Federal Regulations.” Include the specifics of the