Question

Discuss at least two (2) areas in which these deregulation policies impacted the u.s. economy overall and may have had roles in laying the foundation for the great recession of 2008. provide a rationale for your response.

Answer 1

From 1997 through 2006 the price of the average American home increased by nearly 125%. In the same time period this meant the home price ranged from 2.9-3.1 times the average household income. This led to fast and loose lending which include adjustable rate mortgages. This meant that once the economy crashed, up to 9 million homes were foreclosed on in one year, the average year normally sees roughly 1 million homes in foreclosure. In total, that represented $450 billion in losses from the banks.