linerprimo.blogg.se - Panoply 14740

Furthermore, taxpayers should ultimately be made financially whole and better communication with the public should be considered an integral part of any bailout operation. If they are unavoidable, shareholders should take whatever losses the market doles out and creditors should be heavily penalized. To minimize moral hazard, bailouts of companies should be avoided.Policymakers should recognize that the first step in fighting a crisis is to stabilize the financial system because without credit, the real economy will suffocate regardless of almost any other policy response.Policymakers should not respond to every financial event, but they should respond aggressively to potential crises - and the greater the uncertainty, the more policymakers should err on the side of a bigger response.

When financial panics do come, regulators should be as consistent as possible in their responses to troubled financial institutions, ensuring that creditors know where their investments stand and thus don’t run to dump them when good times give way to bad.It is essential that policymakers employ “macroprudential tools” (oversight of financial markets) before the next financial crisis to avoid or minimize asset bubbles and the increased leverage that are the fodder of financial catastrophes.As explained in greater detail in Section 5: Our findings have important implications for how policymakers should respond to the next financial crisis, which will inevitably occur at some point because crises are an inherent part of our financial system. All told, the policy responses - the 2009 Recovery Act, financial interventions, Federal Reserve initiatives, auto rescue, and more - were a resounding success. Nevertheless, these unpopular responses had a larger combined impact on growth and jobs than the fiscal interventions. Indeed, certain financial responses were deeply unpopular, like the bank bailouts in the Troubled Asset Relief Program (TARP).

Many policy responses were controversial at the time and remain so in retrospect. To be sure, while some aspects of the policy responses worked splendidly, others fell far short of hopes. Unemployment was almost seven percentage points lower that year than it would have been, with about 10 million more jobs.

We estimate that, due to the fiscal and financial responses of policymakers (the latter of which includes the Federal Reserve), real GDP was 16.3% higher in 2011 than it would have been.

Today’s economy might be far weaker than it is - with real GDP in the second quarter of 2015 about $800 billion lower than its actual level, 3.6 million fewer jobs, and unemployment at a still-dizzying 7.6%.

The budget deficit would have grown to more than 20 percent of GDP, about double its actual peak of 10 percent, topping off at $2.8 trillion in fiscal 2011.

Unemployment would have peaked at just under 16%, rather than the actual 10%.

More than 17 million jobs would have been lost, about twice the actual number.

The economy would have contracted for more than three years, more than twice as long as it did.

The peak-to-trough decline in real gross domestic product (GDP), which was barely over 4%, would have been close to a stunning 14%.

Without the policy responses of late 2008 and early 2009, we estimate that: The massive and multifaceted policy responses to the financial crisis and Great Recession - ranging from traditional fiscal stimulus to tools that policymakers invented on the fly - dramatically reduced the severity and length of the meltdown that began in 2008 its effects on jobs, unemployment, and budget deficits and its lasting impact on today’s economy.