The government’s responsibility is to provide the effective policies to regulate any signs of the economic instability or to overcome the economic crises. However, the problem is in the fact not all the policies proposed can be discussed as effective, and moreover, the results of these programs can be expected during a long period of time to make conclusions about the policy’s effectiveness.
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Today, it is possible to assess properly the results of the Troubled Asset Relief Program (TARP) developed by the US government in order to overcome the consequences of the subprime mortgage crisis in 2008.
Many economists state that the idea of the policy is rather effective and advantageous, but the problem is in the approaches to its realization. Furthermore, the public was not aware of the possible positive effects of using the funds of $700 billion and purchasing assets to change the economic situation. Thus, it is possible to state that the general idea to recover the economic situation with references to TARP has many positive features, but it was not realized effectively.
The subprime mortgage crisis became the reality for the US economic environment in 2008, and the situation required its immediate resolution. Wolfson states that the development of TARP was rather ineffective with references to planning the program and realizing its key points.
According to Wolfson, “Treasury Secretary Paulson’s plan to use $700 billion to buy ‘toxic assets’ from financial institutions, signed into law by President Bush on October 3rd, failed to stop what had become by then a generalized panic and freeze-up of credit” (Wolfson 135).
Thus, to unfreeze the credit markets, it was necessary to use the additional or other approaches such as the direct investment into financial institutions (Wolfson 135-136). Those economists who worked out the program paid less attention to developing the steps according to which the program could be used effectively to cope with the panic of the financial institutions, public and private organizations. Moreover, the level of speculation was rather high to expect the positive results from implementing the policy.
Nevertheless, TARP can be discussed as the positive tendency in the development of the US economy during 2008 because it was used to prevent the further collapse of the state’s economy and the whole financial system. The goal of the policy’s development is to preserve the stability of the financial system and market.
MacEwan and Miller pay attention to the fact that “governments have regulations in place that prevent bank runs”, but there are often “insufficient regulations” which are “in place in the international financial system” (MacEwan and Miller 139). Nevertheless, if to discuss the question in relation to the global economy, “it is not financial institutions that are subject to failure, but the economies of nations that, if not subject to failure, suffer severe disruption” (MacEwan and Miller 139).
Today, it is possible to speak about the further huge collapses associated with the country’s banking system in the situation when TARP was not worked out and adopted. The definite mistakes in overcoming the effects of the subprime mortgage crisis with references to TARP are observed, but they are influenced by the global situation of the economic instability during the period.
Thus, TARP can be discussed as a successful program regarding its economic benefits as a policy which can prevent the further development of a crisis. However, the realization of the policy was not perfect in relation to the political perspective and concentration on the role of banks in the crisis. Furthermore, a lot of banks could not use the presented opportunities completely because of many limitations.
MacEwan, Arthur, and John Miller. “Globalization and Instability”. Economic Collapse, Economic Change: Getting to the Roots of the Crisis. Ed. Arthur MacEwan and John Miller. USA: M.E. Sharpe, 2011. 119-142. Print.
Wolfson, Marty. “Derivatives and Deregulation”. The Economic Crisis Reader. Ed. Gerald Friedman, Fred Moseley, and Chris Sturr. USA: Dollars & Sense, 2009. 135-138. Print.