Good Intentions Caused Financial Crisis
On January 5, 2009, President-elect Obama met with his economic advisors to discuss the financial crisis. Obama later announced support for a massive program of government spending to stimulate, or jumpstart, the economy. This stimulus package was projected to cost between $600 billion and $1.3 trillion in new spending.
Obama for America21
Some people are comparing it to the early days of the Great Depression. In late 2008, a major financial crisis hit the United States. With several banks teetering on the edge of bankruptcy, Congress authorized nearly $1 trillion dollars in new spending to prevent the nation’s bank system from collapsing.
As the banking system seized up, other companies began laying off workers. In less than five months, between August and December 2008, over 1.6 million people lost their jobs. By January 2009, unemployment had risen to 7.2%, the highest in 16 years.
The financial crisis began with the best of intentions. Many Americans believe it is good for people to own their own homes. Beginning in the 1930s, the federal government began helping people to buy homes. By 1980, 65% of households owned their own homes. Among minorities, the number was lower, but because the percentage of people owning homes had been slowly rising since the 1950s, no one was too alarmed by these numbers. After 1980, however, the percentage of people owning homes declined to 64% and then remained unchanged for the next 10 years.
Many people grew concerned that buying a house had become too difficult and that a large number of Americans were being shut out of the opportunity to own a home. So the federal government decided to help increase the percentage of home owners. This goal was shared by Democrats and Republicans alike. Both Presidents Clinton and Bush worked with Congress to promote homeownership. No one realized that the programs they passed were sowing the seeds for an enormous economic crisis 14 years later.
