Global Financial Crisis, 2008-2009

The Emergency Economic Stabilization Act (EESA) of 2008, often referred to as the “bank bailout of 2008”, was an act of Congress that created a billion-dollar Troubled Asset Relief Program (TARP) to purchase distressed assets during the Financial Crisis. The EESA was one of the “bailout measures” taken by congress to help repair the economic damage of 2007-08. Although the EESA is a fiduciary-centered act of congress, its long-term implications affected everyday Americans through its policy impacts. One central question in this policy evaluation is to analyze whether the EESA bailout unjustly assisted prominent banks and broker-dealers or whether the EESA was essential to ensure the prevention of the U.S. financial system from collapsing. Because the Financial Crisis of 2007-08 had such a broad impact, especially since many distressed assets were within the residential market [of average Americans], analyzing this Act through research and policy evaluation is especially fitting. This Policy Evaluation explores public policy in emergency circumstances, implications outside the financial sector for the public, and the overall synthesis between major financial markets and institutions and the American general public.

This dissertation examined the literature of cutback management in the context of the Great Recession. Specifically, it studied the relationship between cutback management policies used by county governments during the recession and revenue changes. The purpose of this dissertation was to test whether or not the percent change in revenue had an impact on the probability that cutback management policies were used in the recession. According to the cutback management literature developed in the 1970s and 1980s, there should be a relationship. The theoretical framework used for this study was the rational-approach framework, which proposes that every expenditure reducing and revenue increasing policy is enacted based on the percent decrease in revenue the government faces. This suggests that the cutback management policies are a proportional response to revenue decline. The framework was operationalized by using a binary logistic regression that used policy en actment as the dependent variable and the percent change in revenue as the independent variable. Eighty-six counties were sampled and 7 years of each county's budget book were examined for policies and financial data. The research found that eleven expenditure policies and three revenue policies had a statistically significant relationship with the percent change in revenues. This resulted in the conclusion that the framework and, therefore, the cutback management literature were useful in explaining primarily expenditure policies.