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The economic crisis of 2008 occurred at a time of change in both the legislative and executive branches of government. As the newly inaugurated president, Barack Obama had to continue the recovery plan that began under George W. Bush. The mortgage crisis impacted our nation in many ways. As major corporations who had invested in these mortgages began to see that their loans were being defaulted on, they were forced to start laying off employees. Market forces continued to drive down values of homes and soon overall spending began to decrease. As the market began to slow, prices on consumer goods began to increase, resulting in even less spending. Soon, consumer corporations, such as Ford Motor Company, Target and Northwest Airlines saw massive decreases in revenue and were forced to lay off even more employees.
As the market continued to depress, numerous corporations who had been involved in speculative and risky business transactions in the past suffered greatly. Major finance companies and banks began collapsing sending the global market into a near panic.
President Barack Obama made due on a campaign promise and began injecting millions of dollars into the market. Unlike Franklin Roosevelt’s New Deal, Obama’s bailout plan invested money into the major corporations who were nearing collapse. The recovery package is estimated to be worth around $700 billion including an $85 billion agreement on a bailout of the insurance giant American International Group (AIG), plus $29 billion in support that the government pledged in the combination of Bear Stearns and JPMorgan Chase and as much as $24 billion for mortgage finance companies Fannie Mae and Freddie Mac.
The bailout plan is accompanied by a stronger government presence in the economy. Regulatory legislation and commissions are being implemented to allow for more government intervention and regulation of corporate spending and investment in the future.
In this video, President Obama addresses the United States Congress to ask for approval of the bailout plan. Select the play button to begin the video, and then use the navigation buttons to pause/stop, continue, or reset the video. View the presentation as often as you would like, and take notes as you follow along. Be sure to set your volume at a reasonable level before you begin.
(Or use the following keywords in an online: You Tube OBAMA: Senate Must Pass Bailout)
Based on what you’ve learned about the bailout plan and F.D.R.’s New Deal of the Great Depression, consider the following questions:
- There were many arguments in support of and against the bailout plan. Which side do you agree with and why? Support your argument with articles or other resources.
- Compare and contrast the New Deal with the economic stimulus plan of 2008-2009. Do you feel the differences in each plan are appropriate to the economic problems being faced? Do you feel the money is going to where it will have the most impact to address the economic crisis? Why or why not?
- Do you think government safety nets are necessary and fair in a free market economy? Why or why not?