Causes for the Financial Crisis of 2008

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The financial crisis in 2008 was been considered as the worst financial crisis since the Great Depression. One of the major reasons of the crisis was that banks in the States were given permission by the repeal of the Glass-Steagall legislation, which allowed banks to affiliate with insurance, real estate, security. The goal was to create financial firms “better equipped to compete in global financial markets”. With the firewall between commercial banks, which make loans and take deposits, and investment banks, which underwrite securities removed, an opportunity rise for banks to create and push more money and eventually to speculate on financial markets. The financial crisis reminded us that the banking industry has a serious influence…show more content…
The Financial Services Act has allowed The Bank of England to supervise banks in the United Kingdom and intervene if they see any financial activity not consistent with their objectives. They will also regulate the insurance industry through the Prudential Regulation Authority; which will increase confidence in the community by letting them know that they can use these financial services; getting access to money through banks and knowing that their belongings are insured by these firms and putting a stop to speculation. The future of the banking industry looks more sound and secure with new regulations such as the Dodd–Frank Wall Street Reform and Consumer Protection Act in the United States and The Financial Services Act in the United Kingdom. Banks now have to pay annual tax from their balance sheets. The government hopes this will discourage banks to do risky financial activities and since the financial crisis began in banking, banks should help the economy recover. These legislations aim to put a stop to the impression that whatever banks do without any consequence they will be bailed out by the government and encourage banks to be more responsible in their financial activities. It is important to understand that these
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