The Effectiveness of the Measure Done by the Government for Lehman Brothers in 2008
The modern era has witnessed a number of financial crises that have had an effect on economic
functions in many countries. The economic turmoil in Japan and Hong Kong after 1990 and 1997
respectively and the global financial crises of early 21st century are some examples of recent
crises in history. Governments worldwide play a central role in managing economic environments to
either avert or mitigate the effects of financial crises.
Fiscal policy and monetary policy are the main tools that the government seeks to correct economic turmoil. In light of the frequency and effects of financial crises within the last and present centuries, various governments have adopted better steps in managing prevailing economic conditions. This has included reinventing fiscal and monetary policies and practices to improve monitoring and control of economic activities, provide frameworks on preparedness and recovery and offer financial aid to mitigate the effects of economic crises.
The 2008 financial crisis tested the financial structures of the US financial markets. Ideally, the epicenter of the crisis was the US Mortgage markets. The government decided on a stimulus program which aimed at increasing the money supply to ease credit in the market (Pariente, Bora & Omar, 2011). The objective of this stimulus program was to trigger investment through ensuring that institutions and individuals who require credit are able to obtain from commercial banks. This program was quite successful. However, it faced serious objections from the Republican Party. In this regard, the federal government opted to use US treasuries to pay for the massive fiscal stimulus programs. The 2008 financial crisis in the US and increased government spending as part of recovery was fundamental in demonstrating facilitated economic recovery through deliberate fiscal policy by the federal treasury. Continue reading “Lehman Brothers Essay”