Question

Identify a specific government activity that is justified by each source of market failure.

Answer 1

Market failures over the past fifty years were the result of the 2008 financial crisis, which began in California as a real estate recession in 2007 and then reverted to the financial services industry as a whole.By the end of 2008, many banks and services had disappeared. The crisis, caused mainly by uncontrolled financial institutions, almost hit the US economy. The FDIIC, the Office of Consumer Finance Protection, the Federal Reserve, the US Treasury, the SEC and Congress acted immediately to stabilize the crisis and later announced regulations to address the aggressive lending that led to the crisis.The financial crisis started for a variety of reasons, including the withdrawal of banks and aggressive involuntary mortgages. The residential real estate portfolios of many banks after the onset of the crisis show incorrect information rates on properties or borrowers.One of the first government interventions to prevent this crisis from happening again was the Dodd-Frank Wall Street Reform Act of 2008, which included, among other things, a provision requiring residential mortgage lenders to make "a reasonable decision and sincerity". The borrower's ability to repay a home equity loan "and by recording this decision, an auditor can track the actions taken.The 2008 recession plunged home values ​​in California, the nation's largest market, and many borrowers were unable to repay their loans. All loan information that accurately communicates the exact terms and conditions of principal and interest to the borrower is consolidated into one document rather than split into three.These requirements may not seem like much, but they and many others are helping to ensure that the recession caused by aggressive home loans does not start as easily as it did in 2008. These requirements do not appear. be very important, but they and many others do not. will be. easily reversible like the 2008 recession caused by aggressive mortgages.