ECON312 Course Discussions Week 6

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ECON312 Course Discussions Week 6
How did mortgage-backed securities spread losses during the mortgage default crisis…

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ECON312 Course Discussions Week 6

ECON312 Course Discussions Week 6

All Students Posts 84 Pages 

Money and Banking – 38 Pages 

What factors led to the mortgage default crisis? How did mortgage defaults affect banks involved in mortgage lending and mortgage investing? Securitization? TARP? What do these mean? How did mortgage-backed securities spread losses during the mortgage default crisis? How does TARP illustrate the problem of moral hazard? What did the Federal Reserve do during the financial crisis of 2008 and 2009? How did the recent financial crisis affect the financial services industry? What are some of the major provisions of the Wall Street Reform and Consumer Protection Act?

The mortgage crisis was a result of too much borrowing and a slip up on financial planning. It was also based on the assumption of the public that home prices only go up.  Borrowers who bought more home than they could afford stopped paying the mortgage. Monthly payments increased on adjustable rate mortgages as interest rates rose. As the years went one people whom had mortgage loans saw their monthly payments increase, which lead them to renegotiate their loans or allowing their homes to be foreclosed on…

Monetary Policy and the Federal Reserve – 46 Pages

What is the Federal Reserve (Fed) all about? Which Federal Reserve District Bank is closest to you? Who is the current Chairman of the Fed? Should the Fed remain independent from political authority or should the President and Congress have a say in their operations? Why? Why not? What is FOMC? What is the current Federal Funds Rate? How does the Fed implement monetary policy to manage the economy? At the last meeting of the FOMC, what was done to the federal funds rate–increased, decreased, or no change from previous meeting? Given the current state of the U.S. economy, should the Fed be using expansionary monetary policy or contractionary monetary policy? Why? Why Not?

Expansionary policy, or expansionary monetary policy, is when the Federal Reserve uses tools at its disposal in order to increase the money supply for the purpose of stimulating or growing the economy.
An expansionary policy is typically implemented by the Federal Reserve by enacting one or more of these tactics:

Lowering the federal discount rate:
By lowering the discount rate, the fees it charges banks to borrow from it, the Fed seeks to lower overall interest rates, thereby lowering the cost of money and its availability.

Lowering reserve requirements:
Reserve requirements are the amount of money banks must keep in reserve.  Lowering these reserves enables banks to have more money available to lend and invest…