Regulating Interest Rates as a Solution to the Recession...

Today’s financial crisis has deeply impacted all areas of life not only in the United States, but also the rest of the world. Company giants such as Circuit City ® and Merrill Lynch ® have fallen victim to the financial crisis. One of the biggest industries the financial crisis has had an impact on has been the housing market. Everyday newspapers, journal articles, and television media cover stories regarding foreclosures around the country. To regain financial control of the world and domestic economy, one must begin with the housing market. There are various areas of the housing market, which allow for overhaul and maintain a prosperous future. Regulating bank interest rates and federal interest rates will reduce, if not eliminate the†¦show more content†¦By repaying their debt, this helps the banking industry, which in turn strengthens the economy. This is a win-win situation because everyone benefits from it: the consumer improves his or her credit worthiness in order to purchase a home at a later time, the banking industry does not lose out on loaned money in either the short or long term, and home buyers will be able to enter an agreement with the lender knowing beforehand that their interest rate will not rise at any point, thus making it affordable. For people who are currently in an ARM, the banking industry should allow them to transfer to a fixed-rate loan that allows affordability to the consumer without jeopardizing loss of money on the banking industry. The banking industry should also be flexible regarding requests by its home owners. Some people are beginning to realize ahead of time that eventually they will not able to afford the house they are living in. One solution might be to allow the flexibility such as lowering payments for a specified amount of time such as one or two years. Affordability is the main idea to a homeowner. If a mortgage is affordable, most likely a homeowner will continue to make his or her payments o n time and not foreclose on the home. For example, if a person is paying $1,000 per month in mortgage and is not able to afford this amount, by allowing them to reduce their payments to $800 on a two-year agreement, the bank will temporarily loseShow MoreRelatedInsight From Theory And History1638 Words   |  7 Pagesaddition to borrowing money in an effort to slow the recession, the government used strategies of classical economic theory proposed by Adam Smith. One of the main ideas of Classical economic theory is to reduce the amount of spending by the government in and effort to balance the budgets. In response to these efforts of the government to restore the economy John Maynard Keynes laid out his economic ideas in the book The General Theory of Employment, Interest and Money. 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