Mgmt theory Article Example | Topics and Well Written Essays - 1000 words

Mgmt theory - Article Example Many government-sponsored enterprises came into operation for the expansion of lending in order to give rise to the people owning properties. US basically wanted to increase the percentage of home owners which is why the policy by FED of issuing subprime loans was relaxed, also as there were many competitors in the market issuing loans, the competition also gave rise to the issuance of loans without proper risk identification. It is therefore clear from the background of the years that lead to the crises, that the commonality among the Fed policy-makers and outside interest groups made FED relax the loan-based policies and in turn, the public interest was compromised along with proper accountability of the process. There were many incidents of the courts interfering with the rise in improper lending practices but FED ignored all these acquisitions and disregarded any amendments by the courts. This response of FED was of course due to its inclination towards the housing authority of US. Another reason of FED giving support to mortgages was that as there were many innovations in scrutinization, there was a huge amount of money available for mortgage lending. The fundamental statutory charge of FED indicates that it is only responsible for providing stable prices, providing maximum employment and moderate long-term interest rates. This makes it evident that the role of FED is not to direct the residential mortgage markets or to provide supervision to the lenders outside the banking system therefore; FED is not even well suited for policing the mortgage practices in the country. The main reason of the credit crunch of 2008 is the affect of the environment of the policy process on FED, if this not had been so, this financial setup could have been foreseen, and if not eliminated, it could at least have been to a lesser extent. FED is capable of prudential oversight