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Emergency Economic Stabilization Act of 2008 – Definition

Emergency Economic Stabilization Act of 2008 (EESA) Definition

In 2008, Congress took bailout measures to repair the damage from subprime mortgage crisis and passed the EESA. This authorize the government to buy out $700 billion in troubled assets from banks and to stabilize liquidity in financial markets.

A Little More on What is the Emergency Economic Stabilization Act (EESA)

In the wake of subprime mortgage crisis the U.S senator Henry Paulson propose Emergency Economic Stabilizing Act (EESA). However, the original EESA was rejected by house of representative. They amended the act and then adopted the revised EESA in 2008. But the debate start whether it will really work to repair the damage. Proponents of EESA believed that the act will help to recover the losses and reduced the damages of subprime mortgage.

The US Government began purchasing troubled assets on the terms and conditions proposed by secretary of Treasury. The total bailout amount was $700 billion. The bailout aimed to protect home mortgages, social security funds, employee retirement funds; pension savings; preserve and protect homeownership; promote jobs and economic growth and economic development; cut unemployment rate; maximize overall returns to the taxpayers of the United States; and provide public accountability for the exercise of such authority.

References for Economic Stabilization Act

Emergency Economic Stabilization Act of 2008 (EESA)

Emergency economic stabilization act of 2008, Shah, A. (2009). Harv. J. on Legis.46, 569. The financial crisis of 2008 did not just happen but has been building for months and before that, the government has been involved in impromptu intervention of some failing financial institution by proposing a $700billion dollar package. This led to the passage of an emergency economic stabilization act. The recent development carried out a series of survey and made an observation on the role of Congress during an emergency.

Understanding the Subprime Financial Crisis, Schwarcz, S. L. (2008). SCL Rev.60, 549. This easy-to-read article is based on an important speech given at a law review symposium. It discusses (i) how the financial crisis occurred, (ii) why it occurred, and (iii) what can be done to prevent future occurrence. The article also discusses the problems faced when evaluating mortgage-backed securities, the relationship between financial market breakdown and counterparty risk.

Stating the exception: Rhetoric and neoliberal governance during the creation and passage of the Emergency Economic Stabilization Act of 2008, Hanan, J. S., & Chaput, C. (2013). Argumentation and Advocacy, 50(1), 18-33. Emergency Economic Stabilization Act of 2008 (EESA) was criticized as an act of neoliberalism rather than an act of interventionism, an essential part of the macroeconomic philosophy of Keynesianism. This was because EESA made available $700 million to fund the construction of Wall Street Institutions. The supporters of EESA shaped it as an unstable but very important intervention into the financial market.

The economic consequences of relaxing fair value accounting and impairment rules on banks during the financial crisis of 2008-2009, Bowen, R. M., Khan, U., & Rajgopal, S. (2010). Researchers and industry critics have claimed that Fair Value Accounting (FVA) is responsible for multiplying the recent financial crisis. The authors carry out a survey on the deliberations, decisions, and recommendations of policymakers on FVA to determine if it truly is responsible. They examine ten events related to FVA and from their results they were able to establish the role FVA played in the recent financial crisis.

The political economy of the US mortgage default crisis, Mian, A., Sufi, A., & Trebbi, F. (2010). American Economic Review100(5), 1967-98. We evaluate the effects of constituent and special interest on congressional voting on two important pieces of legislation in U.S economic history. Ideologically conservative representative is less responsive to both. Representative whose constituent experience an exponential increase in mortgage default especially in the competitive district will likely support the foreclosure prevention act. Representative are more sensitive to the default of own- party constituents. Special interest increases the likelihood of supporting the emergency economic stabilization act.

The marktomarket valuation and executive pay package regulations within the 2009 US (Bailout) Emergency Economic Stabilization Act, Haidar, J. I. (2009). Journal of Economic Policy Reform12(3), 189-199. The paper highlights how and explains why mark-to-market valuation standard and policy suspension proponent influence Financial institution and support EESA, and how Financial Accounting Standard Board (FASB) and Securities Exchange Commission can count on while assessing the needs and cost of mark-to-market policy. The paper differentiates between executive pay packages pre and post EESA policies and discuss the promise of executive wages cap within EESA.

The cost of the financial crisis: The impact of the September 2008 economic collapse, Swagel, P. (2010). Pew Charitable Trust Economic Policy Group, Briefing Paper18. When the economic collapse and financial market meltdown of late 2008 and early 2009 occurred, the United States pulled back. Decisive actions weren’t taken to address the pent-up problems of the financial market until when the problem exploded to the edge of catastrophe. But by then, it was too late to prevent severe recession followed by massive job losses, skyrocketing unemployment, lower wages, and a growing number of American families at risk of foreclosure and poverty.  This paper estimates the economic and budgetary costs resulting from the acute stage of the financial crisis reached in September 2008.

Housing and Economic Recovery Act of 2008, Arthur, B. (2009). Housing and Economic Recovery Act of 2008. Harv. J. on Legis.46, 585. In early 2000, mortgages were financed through bond rather than receiving direct deposit from customers, which made more cash available, but these mortgages were adjustable with drastically increase within two years so that by summer of 2008, homes were being reclaimed and this leads to the collapse of U.S housing market. But these properties now worth less than their mortgages and both creditors and lenders lost a substantial amount of money. Congress reacted by passing the housing recovery Act.

Transparency and Bank Supervision, Kelly, J. E. (2009). Alb. L. Rev.73, 421. This article aims to examine the increase in the development of transparency phenomenon in a financial service context while noting its relative absence of definition and applicable practice in jurisprudence and regulatory usage, also the article is designed to check transparency oversight issues and conflicts related to treasury and likely barrier related to transparency prospect

Crisis governance in the administrative state: 9/11 and the financial meltdown of 2008, Posner, E. A., & Vermeule, A. (2009). The University of Chicago Law Review, 1613-1682. This essay makes an argument about comparison in crisis governance and emergency law-making after 9/11 and the financial meltdown of 2008 in which the similarities and differences were explained. First, the political process and constraint in both episodes created a situation in which Congress entrusts vast power to executives. This pattern, which is best explained by Carl Schmitt account of law-making in an administrative state as opposed to the standard Madison view. Second, the differences between loss of popularity in the Bush administration between 2001-2008 and divisive distributive effect of financial management were ascertained.

Market reactions to policy deliberations on fair value accounting and impairment rules during the financial crisis of 2008–2009, Bowen, R. M., & Khan, U. (2014). Journal of Accounting and Public Policy33(3), 233-259. Fair value accounting has been implicated in the financial crisis of 2008-2009. The investigation was carried out on investor and creditors reaction to policy maker deliberation, observation of the positive and negative reaction of the stock market to the proposal that supports or against FVA rule, stock price reaction of bank factor which aids pro-cyclical contagion and examination of alternative source of information on FVA prices. The results of this investigation were obtained

The 2007–2010 US financial crisis: Its origins, progressions, and solutions, Choi, J. W. (2013). The Journal of Economic Asymmetries10(2), 65-77.  The financial crisis of 2007-2010 was caused by excessive liquidity which leads to low-interest rate and securitization of subprime mortgages and later to the great recession. This paper investigated three crucial policies: bankruptcy of Lehman Brothers; the policy reversal from debt purchase to capital purchase under TARP and the bailout of AIG and proffer few ways to prevent future crisis based on Dodd-frank Act and solutions for quicker economic recovery overlooked by this Act.

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