Advertisement

The Great Recession of 2008–2009, Conventional and Non-conventional U.S. Federal Government Responses and Their Impact on U.S. Small Businesses

  • Giuseppe Gramigna
Chapter
Part of the Contributions to Economics book series (CE)

Abstract

This paper provides a general background on the events that lead to the financial crisis and Great Recession of 2008–2009 in the United States. A strong argument can be made that the origins of the crisis can be traced to a fundamental imbalance between house prices and personal income. This imbalance resulted in a pronounced drop of inter-bank confidence, leading to a dramatic rise in the relative cost of capital for financial institutions, and a sharp reduction in lending. As a result, the economy experienced a pronounced recession, hitting small businesses particularly hard.

The U.S. federal government responded with enormous conventional and non-conventional measures to assist the financial markets and stimulate the economy. In addition, the federal government undertook numerous actions to address the sharp drop in the small business sector by providing additional incentives to (1) stimulate small business lending and (2) fortify small businesses’ balance sheets. The U.S. Small Business Administration (SBA) played a critical role in increasing access to capital for small businesses.

The SBA’s Capital Access Programs experienced an approximate 60% decline in its lending volume. The SBA addressed this challenge by providing additional incentives to financial institutions and by assisting in the unfreezing of the secondary market for SBA loans.

Keywords

Gross Domestic Product Small Business Financial Institution Small Firm Federal Reserve 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. ADP (2010) http://www.adpemploymentreport.com/indexsbr.aspx. Accessed 10 Oct 2010
  2. Blinder Alan and Mark Zendi. How the Great Recession Was Brought to an End, July 27, 2010Google Scholar
  3. Board of Governors of the Federal Reserve System (2010a) March 11, 2008 Press Release. http://www.federalreserve.gov/newsevents/press/monetary/20080311a.htm. Accessed 10 Oct 2010
  4. Board of Governors of the Federal Reserve System (2010b) March 18 Press Release http://www.federalreserve.gov/newsevents/press/monetary/20080316a.htm. Accessed 10 Oct 2010
  5. Board of Governors of the Federal Reserve System (2010c) Term securities lending facility (TSLF) and TSLF options program (TOP). http://www.federalreserve.gov/newsevents/reform_tslf.htm. Accessed 10 Oct 2010
  6. Board of Governors of the Federal Reserve System (2010d) Term asset-backed securities loan facility (TALF) terms and conditions. http://www.federalreserve.gov/newsevents/press/monetary/monetary20081125a1.pdf. Accessed 10 Oct 2010
  7. Board of Governors of the Federal Reserve System (2010e). Commercial paper. Accessed 10 Oct 2010Google Scholar
  8. Board of Governors of the Federal Reserve System (2010f). Flow of funds accounts of the United States. Accessed 10 Oct 2010Google Scholar
  9. Board of Governors of the Federal Reserve System (2010g). Industrial production. Accessed 10 Oct 2010Google Scholar
  10. Board of Governors of the Federal Reserve System (2010h). Monetary policy. Accessed 10 Oct 2010Google Scholar
  11. Board of Governors of the Federal Reserve System (2010i). Selected interest rates. Accessed 10 Oct 2010Google Scholar
  12. Board of Governors of the Federal Reserve System (2010j). Senior loan officer opinion survey on bank lending practices. Accessed 10 Oct 2010Google Scholar
  13. Congressional Oversight Panel (2010) The small business credit crunch and the impact of the TARP. http://cybercemetery.unt.edu/archive/cop/20110402035902/ http://cop.senate.gov/documents/cop-051310-report.pdf
  14. Date R, Konczal M (2010) Out of the shadows: creating a 21st century glass-steagall. Cambridge Winter Center. http://www.cambridgewinter.org/Cambridge_Winter/Welcome_files/out%20of%20the%20shadows%20030310.pdf. Accessed 10 Oct 2010
  15. Federal Deposit Insurance Corporation (2010) Call reports. www.fdic.gov. Accessed 10 Oct 2010
  16. Federal Financial Institutions Examination Council (FFIEC) (2010) http://www.ffiec.gov/. Accessed 10 Oct 2010
  17. Federal Reserve Bank of St. Louis. The Financial Crisis: A Timeline of Events and Policy Actions,http://timeline.stlouisfed.org/pdf/CrisisTimeline.pdf. Downloaded November 4, 2010
  18. Guillén MF (2009) The global economic & financial crisis: a timeline http://lauder.wharton.upenn.edu/pdf/Chronology%20Economic%20%20Financial%20Crisis.pdf. Accessed 10 Oct 2010
  19. Moody’s Economy.com. (2010) http://www.economy.com/freelunch/default.asp?src=economy_quick_links_freelunch. Accessed 10 Oct 2010
  20. National Federation of Independent Business (NFIB) (2010). Small business economic trends. Accessed 10 Oct 2010Google Scholar
  21. Standard & Poor’s (2010) S&P Case-shiller home price index. http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us. Accessed on 10 Oct 2010
  22. The White House Office of the Press Secretary (2010) Remarks by the president to small business owners, community lenders and member of congress, March 16, 2009. http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-small-business-owners/. Accessed 10 Oct 2010
  23. The White House, Council of Economic Advisors (2010) Economic report of the president. http://www.gpoaccess.gov/eop/2010/2010_erp.pdf. Accessed 10 Oct 2010
  24. U.S. Bureau of Labor Statistics (2010a). Business employment dynamics. Accessed 10 Oct 2010Google Scholar
  25. U.S. Bureau of Labor Statistics (2010b). Current employment statistics. Accessed 10 Oct 2010Google Scholar
  26. U.S. Bureau of Labor Statistics (2010c). Current population survey. Accessed 10 Oct 2010Google Scholar
  27. U.S. Census Bureau (2010) New residential sales. http://www.census.gov/const/www/newressalesindex.html. Accessed on 10 Oct 2010
  28. U.S. Small Business Administration (2009a) SBA Size standard methodology. http://www.sba.gov/content/size-standards-methodology. Accessed 10 Oct 2010
  29. U.S. Small Business Administration (2009b) Small business in focus: finance. http://archive.sba.gov/advo/research/09finfocus.pdf. Accessed 10 Oct 2010
  30. U.S. Small Business Administration (2010a) Frequently asked questions. http://www.sba.gov/advocacy/7495/8420. Accessed 10 Oct 2010
  31. U.S. Small Business Administration (2010b) Quick reference to SBA loan guarantee programs. http://www.sba.gov/sites/default/files/files/LoanChartHQ20110728.pdf. Accessed 10 2010
  32. U.S. Department of Commerce, Bureau of Economic Analysis (2010) National income and product accounts of the United States, Table 2.1. http://www.bea.gov/. Accessed 10 Oct 2010
  33. U.S. Internal Revenue Service (2010) Statistics on income. http://www.irs.gov/taxstats/productsandpubs/article/0,,id¼125133,00.html, Accessed 10 Oct 2010Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.U.S. Small Business AdministrationWashingtonUSA

Personalised recommendations