Answer the questions in the file below.
Discussion Board. More details in the file.
1. In your own words, why did the debt problem occur?
2. Is it better for our economy to allow free market forces to govern our financial services or should there be more regulation by the Federal government and the Federal Reserve?
3. Should consumers be more protected by better laws or should the idea of “consumer beware” apply in these markets? Has unfair, predatory lending been taking place at the expense of the borrower?
4. Should government help the large banks and brokerage firms and “bail them out” of these bad loans?
5. How much help should be given to borrowers who are in trouble with their mortgages?
6.Does the Federal Reserve have too much power?Did they overstep their authority in the ways that they have dealt with the problem?
7. What is your opinion of “moral hazard” concerns?
8.What “safeguards” have been put in place since the 2008 crisis?Should they be relaxed, today?
20190502210347econ_2301__discussion_bd_4_unit_4__rev._2019
Solution Preview
1 In your own words, why did the debt problem occur?
The debt problem occurred due to a combination of events that involved investment bankers, mortgage brokers and financial brokers at wall street. It started in periods of very massive profitability when investors placed their money in investment banks who in turn bought mortgages through mortgage brokerage firms. The investment on houses rose as the prices of homes rose continuously, this meant that all the parties involved in the deals became exponentially rich and hence borrowed more money to throw into the investments hoping to make more money as the price of mortgages rose the supply of houses increases beyond the market demand. Due to the high prices, homeowners start to default on their mortgages, and hence more houses are in the hands of the banks (Murillo Campello, 2010).
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