American Recovery Act

American Recovery Act

Many big corporations and conservatives argue that Government intervention and regulation is not good for business. The meltdown of 2006 told us a different story, and proved that a government intervention was good for US economy. The American Recovery and Reinvestment Act and The trouble Asset Recovery Program were government quick decision to step in and rescue US economy for a second great depression since 1930.

The American Recovery and Reinvestment Act stimulated the U.S. economy and provided a strong foundation for long-term economic growth and it was enacted in February 2009, implementing a series of tax cuts, like payroll tax cuts and prolonged unemployment insurance benefits. Passing the bill America Recovery was one of the most successful turning points for US economy in 2009. On the other hand Troubled Asset Relief Program gave the Treasury purchasing power of $ 475 billion. The Trouble Assets Relieve Program intention was to increase the liquidity of a secondary mortgage market by purchasing illiquid MBS, reducing the potential losses of the institutions that owned them. Much of the first half of the money was given to trouble banks in cash ensuring that our financial system didn’t collapse. American Recovery and reinvestment Act and The trouble asset Relief Program worked hand at hand together to rescue US economy. With the enactment of American Recovery and reinvestment Act the economy in the 2nd quarter of 2009 fell by only 0.7 percent and then it grew 1.7 % and 3.8% in third and fourth quarter of 2009 due to tax cuts. Putting more money in people pockets help the economy growing too since they would have more money to spend, and reduce their debts.

Between the start of the recession and February 2009 the US economy lost about 4.6 million jobs. Last quarter of 2008 and first quarter of 2009 GDP experienced the biggest decline since 1940. 2006 meltdown was a result of many factors that contributed into the negativity of US economy.

One of the biggest factors was the overvaluations in housing prices followed by the crash of home value beginning of 2007. Home prices decreased at high rate nationwide in USA. Millions of homeowners found them self in jeopardy because their loan was higher than the value of the homes and many of them failed to make mortgage payments. Failing assets prices reduced the value of guarantee and further restricted the availability of credit and dried up many businesses and many large corporations. Small business and corporation was struggling to meet their payroll expenses and many employees were laid off the jobs. Cutting cost to survive the recession by closing many departments and cutting jobs was a survival strategy for many corporations and small business, therefore many homeowners lost their jobs and their house as they failed to make mortgage payments. Job losses reduced consumers’ confidence. Many investors