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I. Introduction.
Corporate greed? Check. Astronomical upper-management compensation? Check.Massive job losses? Check. Record quarterly losses and bankruptcies? Check. “He said,she said” finger pointing? Check. The use of taxpayer money to attempt to solve the problem and let management off the hook? Check. And still no responsibility taken for the problem? Check. So then what makes the current economic crisis different from onesof the past such as the 1979-1982 recession, the Chrysler bailout of 1979, the S&L crisisof the 1980s and 1990s, and the dot-com implosion? In retrospect, not a whole lot. Butthe reason why the current economic crisis is on a scale unimaginable to most people,including many renowned economists is due to the interconnectivity of the globaleconomy, primarily achieved over the last fifteen years according to most scholars. Inthis paper, I intend on laying out the reasons why we are neck deep in this mess today,decipher the government’s actions to prevent the problem from getting worse, andsuggest methods to ensure that this never happens again.
II. A brief history of the subprime mortgage.
Although the sub-prime mortgage industry really took off after the terroristattacks of 9/11, enabled by interest-rate cuts championed by then-Federal ReserveChairman Alan Greenspan and a national economy recovering from a decline in growth,the foundation of the sub-prime mortgage dates back a few decades before that. Sub- prime mortgages grew out of the second lien mortgage business that was started in the1960s by “pioneers” of the industry like “Peter Cugno and Beneficial Finance” (1). In the beginning, companies like Beneficial Finance would not extend “credit to a homeowner
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