Government Role During the Global Financial Crisis

Abstract

In this study we investigated government hand in the Global Financial Crisis. Before, during and after crisis government attempted to solve and avoid the turmoil. But did he succeed?

Beginning with low interest rates set by FED, US government political pressures to enable more Americans to buy homes, unrestrained financial system despite of regulations and fines, human greedy were the main reasons for Great Recession.

More than 30 years of deregulation and reliance on self-regulation by financial institutions was the one big reason for crisis. Besides showing the stages crisis passed, the paper also examines penalties government gave to the financial intermediaries for breaking law in past related to crisis. Showing the emerging process of crisis, the article mainly restricted on US economy - where was the epicenter of problem - and government, while the U.S. financial system stumbles, it may take the rest of the world down with it.

The actuality of the topic is that it was also a social crisis because, unemployment in US had reached to 50 millions which means they also lost their social insurances, and 16 million families had lost their homes. Several corporations bankrupted, in spite of more than these were saved by government. While financial crisis turned into social and economic turmoil it became government prior issue to solve.

Keywords: Global Financial Crisis, US economy, government failure, crisis recovery

JEL Classification: H30, G01, G18, G28, H12, H81