Though America is held in high stature in the world for its powerful largest economic infrastructure, there are a number of loop holes in the American economic policies which will generate the chance of the credit crisis in the country. If the government is well acquainted with the certain factors which are responsible for the downfall, there will be higher possibility of the severe credit crunch in American economy which will have to enhance the scope of unemployment and homelessness.

In the year of 1980, President Ronald Reagan enhanced a series of aggressive free market strategies which are often called Reaganomics in which the government was compelled to minimize the public expenditure, taxes, regulation with the inclusion of inflation. Furthermore, during the realm of President Bill Clinton, the American economy suffered the backlash of the dot com stock market crunch in which there was the steady possibility of a razor sharp recession in the value of technology based stocks as they were considered to be overvalued at the time of assessment done by conventional criteria such as profitability including company asset holdings. There is no denying the fact this type of dot com stock market crisis snowballed into the total insolvency among the business community with the brightest possibility of the loss of the thousand jobs in the country.

There is no denying the fact this type of credit crunch has given severe setback to the country’s economic infrastructure and its steady progression. Last but not the least, in October 2001, the House of Representative sanctioned the approval to a US$100 billion economic stimulus plan which has been designed and well programmed to give impetus to the American economy with the series of blitzkrieg invasions of some militancy outfits of al-Qaida network in New York and Washington DC in September, 2001.

The Federal Reserve pumped $10bn of liquidity into the banking sectors and in New York the blue chip index experienced the losses and was lowered only by 16 at 13,272. Again, Freddie Mac, the American government sponsored mortgage aggregator that purchases loans and presses them into repackages as sorts of securities to expenditure down for low-income households divulged that it had adopted a $320m hit on credit crunch within the timeframe of three months to June.

Standard & Poor’s, the credit rating agency, did forecast by claiming that there would be more hazards in future for investment banks which could watch their banking and trading profits downfall by 70%. Furthermore, in a research work, S&P’s credit analyst named Nick Hill stated that the revenue for Wall Street institutions could be at attrition level as much as 47% which is little bit worse in comparison to the 31% nosedive in the second part of 1998 when the markets were given a jolt by an financial crunch in Asia and monetary devaluation in Russia. Therefore these factors own the responsibility to enhance the ongoing possibility of the credit crisis in the American economy. Steve Akers of liquidators Grant Thornton, stated that assets in Britain and America need to be kept intact and protected  due to financial crunch. According to the Greenwich Associates, the consultancy, hedge funds are no longer considered to be an integral part of the market for the fixed-income products.

In this context the Bush administration was informed beforehand by the Bank of International Settlement, the World Bank, the International Monetary Fund and the European Central Bank regarding their wrong economic policies which would enhance the occurrence of credit crisis in the country. However it is a matter of grave concern that the then Bush administrative machinery connived at the warning.