In September 2008, the U. S. Treasury made an unprecedented request of Congress

Question

In September 2008, the U. S. Treasury made an unprecedented request of Congress to pass an emergency $700 Billion-dollar Rescue Plan to bail out Financial Firms whose mismanagement of sub-prime loans threatened the liquidity and solvency of the entire banking industry.

A.) In your opinion, do you believe that Congress acted correctly in approving the Treasury’s request? Why or Why not?

B.) If Congress did not approve the Rescue Plan, what would have been the consequences? In your opinion, would this course of action been better in the long run?

Explanation / Answer

Answer(A)- In my opinion, Congress acted correctly in approving the treasury's request.

Reason- Subprime crisis was a huge crisis and it did not merely affect USA but other countries too. It was a time of recession in the country. There was liquidity crunch, banks were suffering from lack of liquidity and they were getting insolvent. To come out this situation, bail out package was the need of hour. So to make the rescue plan successful, bail out package was very important so that banks could get rid of liquidity crunch and revive once again.

Answer(B)- If Congress did not approve the rescue plan, the picture would have been different. Banks would loosed their identity and they could never come out from debt and liquidity problem. Many banks would have got bankrupt and banking industry would suffer a lot that later would lead the economy to the worst level.

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