Question

What things were done or could have been done to solve the great recession or mitigate it?

Answer 1

The 2008 financial crisis could have been prevented by the Federal Reserve and the Bush administration. But the early warning signs were ignored. The first leading indicator showed trouble in November 2006. The Department of Commerce reported a 28 percent drop in a year in new home permits. That meant that for the next nine months, new home sales would slow. But nobody could believe that the prices of housing would fall. Since the Great Depression, it had not happened.The second clear indication of economic distress was overlooked by the Fed in 2006. That was the U.S. yield curve inverted. Treasures. Treasures. If short-term Treasury Note yields are higher than long-term yields, an inverted yield curve occurs. There are lower regular short-term yields. Investors need a higher return to keep their money tied up for longer. But for insurance from a recession, they must invest in a long-term bond. Before the recessions of 2001, 1991, and 1981, the yield curve had also reversed.

In November 2007, the United States The real situation was realized by Treasury Secretary Henry Paulson. The banks had a question of reputation, not of liquidity. He was creating a Superfund. In dollars from the private sector, it used $75 billion to buy bad mortgages. Even the Treasury promised them. But it was too late to solve the problem by this time for a public / private partnership. The financial markets had already been seized by panic. It became clear that there wouldn't be enough $75 billion. Where things might have prevented the crisis. The first would have been mortgage broker regulation, which made bad loans, and hedge funds, which used too much leverage. The second would have been recognized early on as being a problem of credibility. The only remedy was to buy bad loans from the government.

But the financial crisis has also been triggered by financial innovation that has outperformed human intellect. Even the quant jocks who produced them did not understand the potential impact of new products, such as MBS and derivatives.By through some of the power, the law would have eased the recession. It couldn't have stopped new financial products from being made. Fear and covetousness will always create bubbles to some degree. Innovation will always have an effect that is not apparent until after the fact.