With the election of risk taker Donald Trump as president, people should recall what lessons were learned from the 2008 financial crisis.
Many consider the Great Recession to be the most detrimental crisis since the Great Depression of the 1930s. The 2008 financial crisis, or Great Recession, led to the lost of 8.7 million jobs and foreclosure on more than four million homes of American families. Not only did the recession affect American people, but the financial meltdown threatened the world economy.
Government inaction was part of the cause of the 2008 financial crisis. In the years before the 2008 financial crisis, the U.S. government policy had emphasized deregulation to encourage business, resulting in less oversight of activities. When lending institutions wanted to profit off of loans to homebuyers; financiers began making subprime mortgage loans. People who could not afford to pay back their mortgage loans were buying houses because lenders said that they could.
High risk mortgages were bundled and turned into supposedly low-risk securities at big banks. Since people could not pay back their mortgages, a high default rate in the subprime home mortgage sector occurred. The financial crisis occurred because the government was not regulating the unscrupulous, profit-driven behavior of businesses.
Americans demanded government action during the Great Recession. It took a 700 billion government bailout of banks, as well as an auto industry bailout, to stabilize the U.S. economy.
A crucial lesson to learn from the 2008 financial crisis is that the U.S. government cannot ignore its role in the economy. If the government had tried to curtail the subprime loan practice, perhaps the 2008 financial crisis could have been avoided. Laws and regulation are needed to recognize when a problem occurs and deal with them early on.
The Republican Party tends to favor less government regulation in the economy.
President-elect Trump has said that he plans to slash corporate taxes and help businesses. Even though Trump as a Republican obviously believes that governments should be regulating businesses less, he should not be hesitant to intervene.
President-elect Trump should remember that even when the Republican-majority Congress does not agree with government regulation of business, the President has the authority to issue executive orders and bypass Congress entirely. As president, Trump should keep himself informed about business practices and economic activity. Regardless of how optimistic Wall Street might sound, it is always important to keep a close eye on big business.
No regulation is actually worse than having some regulation. Regulation might be needed to ensure a stable economy. If markets begin to fail, the government should take the steps to stop the situation from progressing any further.
While businesses might like to be left alone, Trump should remember that he has a duty as president to ensure the public safety and make sure businesses do not do anything that might cause damage in the economy.
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