How education of decision maker and managing OC change to reduce risk in the Future crises

Due to the big recession and the adoption of conventional fiscal stimulus measures during the GFC, the policymakers’ response to the financial crisis was extensive and diverse. The consequences were devastating, and the problems of unemployment and budget deficits continue to be present in the contemporary economy. Financial management is crucial in providing important advice on how the Freddie Mac decision-maker should handle any foreseeable future financial catastrophe. Prior to the next financial crisis, policymakers should oversee capital markets in order to prevent rising leverage and bubbles that drive economic catastrophes. Secondly, the policymakers should recognize that the first approach to fighting financial crises is through stabilizing the financial system since when there is no credit, the economy generally will suffocate irrespective of employing any policy to respond to the crises.

Thirdly, bailouts of companies should be avoided to reduce moral hazard. When the circumstances are unavoidable, the stakeholders should incur losses which the market doles out, and substantial penalties to creditors should be imposed.

Fourthly, the decision makers should not respond to every financial event, but instead, they should respond quickly to potential crises. Fifth, the policy makers should not move fiscal policy from stimulus to austerity until the economy is enjoying self-sustaining development and the financial system is stable (Moore, 2010). Sixth, the decision makers should use the monetary and fiscal approach to fighting recessions in two-handed, and if possible, they should choose specific financial and monetary tools that reinforce each other. Seventh, the monetary policy of discretionary which has been a standard way to combat recessions for the depression is still an effective way to calculate the magnitude of the unpredicted decline in the activity of the economy. Finally, the policymakers should be open to supplementing conventional monetary policy with alternative policies since some standard policies such as lowering the overnight interest rates may not be enough to forestall severe recession. Unconventional policies such as the programs which involve large-scale purchases of financial asset, particularly those of short term and the simple interest approach zero.

How the GFC has influenced a restructuring

The GFC which occurred between 2008 and 2010 resulted in restructuring of the United States system. The nation invests more in research and development using new technologies than any other field. The study of the extent of investment in the country at large. Also, the public and private businesses debt are one of the causes of the current crisis particularly in the trade deficits which highlights weakness in the economy of American. The financial crisis had many and complex contributing factors. Some of the factors crossed critical disciplines, such as geopolitics and macroeconomics resulting to complication in the actual cause and effect. The factors identified to have contributed to GFC included; large and growing current account deficits, the United States government push into mortgages and housing, securitizing of loans and fed lowering interest rates (Helleiner, Pagliari, & Zimmermann, (2010). Freddie Mac is among the companies in the United States which lead to a variety of changes which pushed the residential housing resulting to dramatic increase in demand for housing which ultimately led to unstable financial markets.

The GFC is the mark for the end of a period in the global economy that illustrates transition to new structures of economic relations. The deeper reasons for the crisis is due to poor economic policies of the United States and the ability of several Asian nations, particularly China, to exploit weaknesses of United States. Some recommended restructuring involve. First, both China and the United States should make significant adjustments to their home economies so that they can restore a more stable and real global economy. Secondly, due to the failure of previous policies new forms of domestic and international structures should be created. Thirdly, the United States should cut consumption and increase savings to give the resources for constructing a stronger economy (Savona, Kirton, & Oldani, 2016). Fourthly, the income tax for the wealthy must be raised, and benefits to the popular health and retirement must cut to close the fiscal gap. Fifthly, the national investments should focus on increasing competitiveness for a new domestic economy particularly new investments in workers. Finally, the economy should shift from importing foreign goods to exporting products of high value as well as reducing the burdens of debt and generating an economic growth that is shared by all.

In conclusion, financial crises should be avoided at all cost since their occurrence is damaging to a company, nation or global economy in general. The governments and central banks have been doing remarkable actions to ensure that the international financial crisis is contained in spite of policies which have made it highly challenging to perform the task. Notably, Freddie Mac should make sure its financial safety through employing approaches such as financial management, risk assessment, ongoing monitoring, political change assessment, audit management and target examinations. Evaluation of financial condition, liquidity, earnings and measures to minimize risk are also essential. Designing policies and understanding the ways in which risk may occur and use of risk-taking approaches to highest priority task should be undertaken to avoid the collapse of any financial system.

References

Helleiner, E., Pagliari, S., & Zimmermann, H. (2010). Global finance in crisis. New York: Routledge.

Moore, D. (2010). CBO’s budgetary treatment of Fannie Mae and Freddie Mac (1st ed.). Washington: Congress of the U.S., Congressional Budget Office.

Savona, P., Kirton, J., & Oldani, C. (2016). Global financial crisis. London: Routledge.