It is hard to imagine the world with
a poor government base. This is in reference to the possibility of a poor
government system. The government plays a huge role in the
stability and growth of our economy. Without the government, the economy would
be a free for all.

            However,
the struggle with the perception of society is the lack of understanding of the
government’s role. From the article “What
is the Role of Government in Society?” the author stated “The alternatives
are really rather simple. Government may be narrowly limited to perform the
essential task of protecting each individual’s right to his life, liberty, and
honestly acquired property. Or it may be used to try to modify, influence, or
dictate the conduct of the citizenry (Ebeling, 2016).

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In the first case, the
government is assigned the duty of impartial umpire, enforcing the societal
rules against assault, murder, robbery, and fraud. All human relationships are
to be based on mutual consent and voluntary association and exchange. In the
second case, government is an active player in people’s affairs, using its
legitimized power of coercion to determine how the members of the society may
live, work, and associate with each other. The government tries to assure
certain outcomes or forms of behavior considered desirable by those who wield
political authority (Ebeling, 2016).”

The government plays a big
role in stabilizing the economy and making sure things are going according to
the plan. The outcomes that we constantly experience are a result from the
government’s strategic plan. Yet, things can go sour and it is the government’s
responsibility to ensure coverage. The topic of the financial crisis goes hand
and hand with the responsibility of the government.

The economic disaster in 2008 was a disaster
that the economy really did not need. This refers to the impact it made. From
the article “The 2008 Financial Crisis”,
the author stated “The 2008 financial crisis was the worst economic disaster
since the Great Depression of 1929. It occurred despite aggressive efforts by
the Federal Reserve and Treasury Department to prevent the U.S. banking system
from collapsing.

It led to the Great
Recession. That’s when housing prices fell 31.8 percent, more than during the
Depression. Two years after the recession ended, unemployment was still above 9
percent. That’s not counting discouraged workers who had given up looking for
work. The first sign that the economy was in trouble occurred in 2006. That’s
when housing prices started to fall. At first, realtors applauded. They thought
the overheated housing market would return to a more sustainable level (Amadeo, 2017).

Realtors didn’t realize
there were too many homeowners with questionable credit. Banks had allowed
people to take out loans for 100 percent or more of the value of their new
homes. Many blamed the Community Reinvestment Act. It pushed banks to make
loans in subprime areas, but that wasn’t the underlying cause. The Gramm-Rudman
Act was the real villain. It allowed banks to engage in trading profitable
derivatives that they sold to investors. These mortgage-backed securities
needed mortgages as collateral. The derivatives created an insatiable demand
for more and more mortgages.

The Federal Reserve believed the subprime
mortgage crisis would only hurt housing.

It didn’t know how far the damage would spread.
That’s because it didn’t understand the true causes of the subprime mortgage
crisis until later (Amadeo, 2017).”

            The
economic crisis unsterilized the economy’s positive status. The housing market
took a detrimental blow and it was hard to recover from the tragedy. The
government’s job was to re-stabilize the economy. The government has a major
responsibility in regulating the financial services industry after the economic
crisis in 2008.

            Their
role has a major potential impact on the financial sectors and the adaptation
of business practices and the procedures that go with the regulation process.
From the article “What impact does
government regulation have on the financial services sector?” it stated “The
Securities And Exchange Commission (SEC) regulates the securities markets and
is supposed to protect investors against mismanagement and fraud. Ideally,
these types of regulations also encourage more investment, and help protect the
stability of financial services companies. This does not always work, as the
financial crisis of 2007 demonstrated. The SEC had relaxed the net capital
requirement for major investment banks, allowing them to carry significantly
more debt than what they had in equity. When the housing bubble imploded, the
excess debt became toxic and banks started to fail (Investopedia, 2017).

Government regulation has
also been used in the past to save businesses that would otherwise not survive.
The Troubled Asset Relief Program was run by the United States Treasury and
gave it the authority to inject billions of dollars into the U.S. financial
system to stabilize it in the wake of the 2007 and 2008 financial crisis. This
type of government intervention is typically frowned upon in the U.S., but the
extreme nature of the crisis required quick and strong action to prevent a
complete financial collapse (Investopedia, 2017).”

            It is tough to envision the world
with a deprived government base. This is in reference to the chance of a
unfortunate government system. The government plays a enormous role in the
stability and growth of our economy. Without the government, the economy would
be a free for all.

 

 

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