Financial Crisis There Are Signs essay

Download this essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from essay:

These borrowers had -- knowingly or not -- been gambling on a real estate market they did not understand. Understanding the complexities of the real estate market and fiscal policy is complicated -- those who have grown up without access to the best education and who do not have experienced friends and family to help advise them in this process were the most vulnerable.

Squires, Hyra and Renner showed that subprime lenders were able to segment their market by geography. Combined with the ethnic segregation that exists in most American cities, the outcome was simple -- minorities were targeted for subprime loans. The poor and working class were targeted by predatory lenders. When the crisis hit, it was these groups that suffered the most and foreclosure rates in these communities spiked.

Interest Rates & Bank Deregulation

To spur economic growth during the slowdown in 2000-02, the Federal Reserve lowered interest rates and implemented other measures to inject capital into the economy. This is the money that flowed into the real estate market, initiating the bubble. Banks could not find enough prime borrowers, and so increased their rate of subprime lending. They did this because deregulation of the industry had allowed them to increase their risk. The result was that banks reaped short-term rewards, but at the expense of increased risk levels. In countries that did not experience this deregulation, such as Canada and Australia, the banking system remained robust throughout the crisis and its impacts on workers were not felt as strongly. Bankers made less money, but the economy was insulated from the worst of the impacts.


When U.S. banks began to fail under the weight of mounting foreclosures, the government stepped in to bail them out, first the Bush administration and then the Obama administration after that. The banks expected this -- George Bush, Sr. had bailed out the industry in the wake of the savings and loan crisis so bankers knew the government would step in to protect them. Wealthy bankers gamed the system -- they gambled with money that they knew was guaranteed by the American taxpayer. In the good times, they took home tens of millions of dollars in bonuses. In the bad times, the taxpayers covered the losses. Even the bonuses, which the Obama administration initially railed against, have now become acceptable. The public, meanwhile, has seen its taxes increase and programs cut in order to help pay for these bailouts and bonuses.


The financial crisis exemplifies the argument that Scott and Leonhardt make about the ways in which the wealthy classes continue to find ways to press their advantage at the expense of lower social classes. Bankers well versed in economics and armed with government policies favorable to their interests flourished in an environment that promoted risk-taking. They reaped the rewards knowing that the taxpayers would pay the cost of their failure, a lesson they learned during Bush, Sr.'s pro-upper class administration.

The banking industry is back to business as usual, racking up profits and bonuses along the way. For them, the financial crisis is essentially over. For millions of Americans that suffered foreclosure, the crisis is ongoing. While many pundits place the blame on a lack of financial savvy, they fail to ask how this lack of savvy came about. The ghettoization of poor Americans -- usually ethnic minorities -- results in poor educational opportunities and poor job prospects. This creates a class of American ill-prepared to gamble on real estate markets, or to weather a financial crisis. The class that influences the laws and has access to the education and experience that allows them to understand housing bubbles, interest rate policy and other factors influencing this crisis has emerged from the crisis quickly and easily. The other class -- without the benefits that come with wealth and privilege -- is left with high rates of unemployment, tax increases they cannot afford, and cutbacks to the few social services they receive. There can be little doubt that this situation will only drive the wealth and class divide in this country further apart, setting the stage for future exploitative crises.

Works Cited:

Squires, G.; Hyra, D.; Renner, R. (2009). Segregation and the subprime lending crisis. EPI Briefing Paper. Retrieved February 15, 2010 from

Scott, J. & Leonhardt, D. (no date). Shadowy lines that divide.[continue]

Some Sources Used in Document:


Cite This Essay:

"Financial Crisis There Are Signs" (2010, February 15) Retrieved October 24, 2016, from

"Financial Crisis There Are Signs" 15 February 2010. Web.24 October. 2016. <>

"Financial Crisis There Are Signs", 15 February 2010, Accessed.24 October. 2016,

Other Documents Pertaining To This Topic

  • Financial Crisis in Canada Is

    The partisan politics seen south of the border would be impossible, because the resulting inaction would be viewed unfavorably by Canadians. The financial crisis has damaged Canada economically, but it has also highlighted the value of financial conservatism. Canada's handling of the crisis has improved its standing in the world. The Canadian banking system has been lauded for its conservative nature. Further esteem has been brought to the government for

  • Financial Crisis in Peripheral Europe

    In other words, there are few controls in place to ensure responsible spending or, in the case of Greece, that the books are not cooked. The implication of this is that Greece makes errors and commits fraud, knowing that the eurozone will be forced to bail them out or risk grave instability. The other nations are then forced to bail Greece out, because they share a common currency and

  • Financial Crisis the Current Financial

    What one can determine from the current literature, however, was that today's recession was fueled, at least in part, by the misuse and misdistribution of credit. For this reason, the current culture shift is most likely a solution to the problem it itself. Responding to the recession, the American people have changed their attitude toward politics, spending, and the importance of finances in their daily lives. By spending less,

  • Employee Relations Financial Crisis Managing Employee Relations

    Employee Relations Financial Crisis Managing Employee Relations in the Event of a Financial Crisis A Look into Management can Effectively Navigate through Adverse Conditions Austerity Protests (Dowling, 2012) Employee relations can often be a difficult aspect of maintaining the overall health of an organization. In general, employee relations often refer to the act of fostering productivity, motivation, and employee morale in an organizations human resources pool. However, there are some circumstances in which it

  • Causes of Financial Crisis

    Causes of Financial Crisis Ireland developed high growth rates based on rapid expansion of credit and a buildup of personal debt fueled by rising property prices (Ireland's economic crisis: how did it happen and what is being done about it?). This lead to risky bank lending practices. Banks also engaged in short-term borrowing from wholesale money markets causing increased risk appetite. Supervisors and regulators failed to identify and act on the

  • Asian Financial Crisis of 1997 the Economies

    Asian Financial Crisis of 1997 The economies of the so-called "Asian Tigers" were looked at with envy by the rest of the world in the early 1990s. These Southeast Asian countries -- South Korea, Taiwan, Singapore, Hong Kong, Malaysia, and Thailand had shown impressive (in most cases double-digit) growth rates for the preceding decade and more; thus becoming "darlings" of liberal capitalism and globalization in the post-cold war era. Other developing

  • Global Financial Crisis An Examination of One

    Global Financial Crisis: An Examination of One Company's Performance Indicators The global financial crisis of the recent past has been the subject of much commentary, investigation, and debate from people around the globe and from all walks of life. Despite the fact that politicians and armchair policy makers have gone round after round in debates regarding the causes and the ultimate effects of this worldwide economic downturn, the real effects

Read Full Essay
Copyright 2016 . All Rights Reserved