Deregulation is cause of credit crunch
Deregulation is cause of credit crunch
People are often trying to pinpoint the cause of the economic decline that is occurring across the country. Well some will say that deregulation is the cause of the credit crunch that is upon us now. Many people are unsure what this really means, so that is what I will try to explain in some more simplistic terms that everyday people can understand. When the banks were given the ability to deregulate, people were able to get loans despite having poor credit histories and finances in a similar state. Some people were getting upwards of 100% of the financing to invest in homes. Many of these people were getting there homes with adjustable interest rates, but were finding that when the interest rates rose that they were unable to afford the payments that they needed to make. So with this happening to people, a lot of them would be forced into the position of foreclosure. With the amount of foreclosures this would make for a large increase in the number of properties that would be for sale and thus result in the properties that the lenders had invested in were not worth as much as they had loaned in the beginning. With the lack of regulations the banks and the financial institutions were free to run about and do pretty much as they pleased, thus the result that we are seeing now, an economy that has been devastated. Along with this the banks and other lenders are awaiting the government to help bail them out of the situation. Now if the government had have maintained some of the regulations, it is quite possible that the economy would not be where it is today. If they had some of the regulations that they did years ago they would not have been able to pull some of the risk taking measures that they have, and having them unable to do this would have helped to save our economy to some degree. Many people feel that deregulation is the cause of the credit crunch that the country is in now and that the government should step back in and regain some of the control that it had before the Reagan days. Now if the current government could impose some regulations without going to the extreme, it could prove to be a very beneficial thing for everyone that is involved, and quite possibly rebound the flailing economy. President Barrack Obama has a huge job ahead of him. With the new government now in place, maybe the necessary changes will now come about. We all hope that something positive can be accomplished.
