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The Role of the U.S. Recession in the Global Economic Crisis
The global economy has suffered some of its worst losses in recent history and countries around the world are pointing their fingers in blame directly at the United States. How did it come to pass that the United States, one of the greatest capitalist economies in the world, is being assigned the blame for a deep, global economic crisis?
The U.S. economy is clearly facing one of the worst recessions in its history, which began around 2008. What is less clear is how we got here. Opinions vary on when and where to begin the story, but many experts trace the origins of the current economic situation to the housing bubble that came about around the turn of the century. Housing prices jumped at a rate above 6 percent in 1999 and increased rapidly and steadily as the decade turned.
“After the mid-1990s … real house prices went on a sustained surge through 2005, making residential real estate not only a great investment, but it was also widely perceived as a very safe investment,” one study said.
Home prices eventually rose to a level that income could not sustain. There were two trends developing at that time which contributed to the housing bubble, experts stated. The Federal Reserve Board, to combat the recession of 2000-01 and the economic effects of the September 11 terrorist attacks, began drastically slashing interest rates. Consequently, it was very easy to borrow money, especially if you wanted to buy a home. Mortgage companies, investment companies and banks all opened their reserves to easy and speculative loans to take advantage of the sudden interest in financing. Additionally, during the Clinton era, the federal government worked hard to get all middle-class families in homes. As such, some speculate that the standards were stretched for some families with the hope that the housing values would continue to rise as they had in recent years.
The collapse of the housing market has had an enormous impact on numerous levels, including the local citizen, corporations, financial institutions, government agencies and the global community. In Part I of the Semester I Final Project, we explored the impact of the financial crisis on our community and neighbors. Part II will now focus on the corporate backlash and the government’s response to facilitate a resolution.
In Part II of the Semester I Final Project, you will create a report of how major U.S. businesses were both impacted by and contributed to the U.S. recession. Furthermore, the project will address the government response to the financial crisis faced by major U.S. businesses. The project can be submitted in the format of your choice, such as a slideshow presentation, research paper, or journalistic podcast, as long as all criteria below are addressed. The project should include:
- Corporate Impact: Summaries of how 3 different major U.S. businesses (such as AIG, GM, Sally Mae, Lehman Brothers, Citigroup, etc.) were impacted by and/or contributed to the current U.S. recession or their own financial hardships. Each summary should be supported by and reference one or more reliable media resources (articles, videos, blogs, podcasts) examining the issue.
- Government Action: Summary of the actions taken by the Federal government in response to the financial crisis of one or more major U.S. businesses. The summary should be supported by and reference one or more reliable media resources (articles, videos, blogs, podcasts) examining the issue.
- Your Analysis: Respond thoughtfully to each of the summaries you provide, address the following questions, and support reasoning.
- Do you feel any of the companies played a role in creating the current recession or their own financial hardships? Do you feel they should have been more prepared to overcome financial hardships? Why or why not?
- Should the government get involved in “bailing out” major U.S. corporations? Why or why not?
- Should companies be required to pay the government back?