The U.S. government responded to this crisis by lending a hand to American International Group and also Bank of America, the United States’ largest bank. Bank of America was given $20 billion in government aid and $118 billion worth of guarantees against bad assets. In addition, the US Treasury agreed to take a stake in the company in return for their financial assistance. Bank of America was believed to be one of the strongest banks in the United States, until they made the acquisition with Merrill Lynch. However, by emphasizing revenue cycle management education many of the problems that led up to the 2008 crisis could have been mitigated.
In addition to helping AIG and Bank of America, the government also responded to the financial crisis by injecting more money into the market in order to avoid a deflationary impact that can be caused from a major decrease in consumer spending. When the Government increases the supply of money, they are improving liquidity in the market, which then introduces the concern that too much money in circulation would cause inflation. Inflation decreases consumers’ purchasing power and essentially anything you have too much of loses its value. After the crisis, the government had to be more vigilant than ever to recognize when to start tightening credit again to prevent future disruptions to our credit and financial system.
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