The imminent financial disaster has aroused considerable political concern. Last Thursday, a group of congressional leaders listened to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke's description of the terrible situation that would happen to the economy if Congress failed to pass a comprehensive plan to save the financial crisis. By then, not only mortgage loans, but even student loans and car loans may be difficult to obtain. The economy will fall into a serious recession.
For this reason, temporary measures will remain crucial, such as the federal government's guarantee for money market funds last week, the Federal Reserve's loan to banks to buy asset-backed commercial paper, and Sunday's approval of Morgan Stanley and Goldman Sachs, the remaining two large independent investment banks, as bank holding companies under the supervision of the Federal Reserve, whose investment banking departments can now borrow from the Federal Reserve on the same terms as other banks.
Therefore, special rescue measures are still crucial. Last week, the federal government provided guarantees for the money market and bought asset-backed commercial paper loans from banks through the Federal Reserve. On Sunday, the remaining two large investment banks, Morgan Stanley and Goldman Sachs, were allowed to become the Federal Reserve to supervise bank holding companies, so that their investment banks can now borrow money from the Federal Reserve like other banks.
It may take some time for the Ministry of Finance to buy mortgages on a large scale, and it will take longer before it starts to affect the wider financial system and economy. At the same time, this crisis may cause other victims.
It may take some time for the Ministry of Finance to complete the purchase of all mortgage loans, and this move will take more time to play a role in the entire financial system and economy. At the same time, the harm of the financial crisis may spread to more institutions.
Useful words and sentences:
financial crisis
The clouds split, the clouds dispersed and dawn appeared.
But there are many questions about Wall Street's $700 billion rescue plan.
There are still many questions about the $700 billion Wall Street rescue plan.
Paulson's plan is shocking because of its simplicity (two and a half pages) and boldness.
The simplicity (only two and a half pages) and boldness of Paulson's plan are amazing.
What caused the financial crisis?
I think we can sum up the cause of the current economic crisis in one word-greed. For years, mortgage agencies have been happy to lend money to those who can't afford their mortgages. But they did it anyway, because there was nothing to lose. Se lenders can charge higher interest rates and make more money on subprime loans. If borrowers default, they just need to take over the house and put it back on the market. Most importantly, they can transfer the risks to mortgage insurance companies or package these mortgages into mortgage-backed securities. Easy money!
What's wrong with our financial system? The whole thing is a big plan. Everything is fine when the house sells well and the price goes up every month. It is easy for lenders to borrow money, and rising demand has pushed up house prices. Higher housing prices mean that lenders can borrow bigger mortgages, which also provides some protection for lenders against foreclosure. All this translates into more money for lenders, insurance companies and investors. Unfortunately, when adjustable mortgages were finally adjusted, many borrowers were hit. When too many lenders are unable to repay their loans, these lenders will encounter liquidity problems, and the number of foreclosures will exceed the number they can sell. Mortgage-backed securities have become cheaper and cheaper, which has caused losses to investment companies such as Lehman Brothers. In addition, insurance companies such as AIG, which provide insurance for these bad mortgages, are also in trouble.
The plan worked well, but it reversed the direction and is now making a comeback, hurting everyone in revenge.
The crisis of American real estate market, which lasted for more than a year, gradually spread to the whole financial system and became a global financial crisis, in which every country developed.
Accustomed to the market economy, most western countries can't rely on government investment to tide over this crisis, but they have no choice.
Basically, in this crisis, the government should do at least two things. First of all, sufficient funds should be prepared to ensure the stability of the entire financial system. Maintaining the stability of the financial system is becoming one of the most important things in today's economic system, because a healthy financial system is the basis of healthy financing and investment. Without financing support, the real economy is difficult to grow.
Secondly, the whole financial system must undergo some changes, which should be organized by the government. If the traditional investment method is proved to be ineffective in the current economic situation, then the old financial system will need some improvement. For example, when the investment bank went bankrupt in the financial crisis, the US government quickly abandoned this organization to protect investors and other financial institutions.
In addition, the government should take many other measures, including maintaining the stability of the commercial market and the normal life of residents, and mentioning the low unemployment rate.