Financial Industry : The Financial Sector

In 2007-2008 the US went into a recession, a financial crisis that has since then taken five years to rebuild. During that time millions of Americans were unemployed and faced many economic struggles which negatively impacted the real estate market causing a multitude of foreclosures. The reason for this recession was because there was no authority over banks and they were not being monitored properly. Banks were able to gamble with the finances of millions of people with no consequences towards their actions. The Dodd Frank Act Wall Street Reform and Consumer Protection Act of 2010 was put into place to make sure that nothing like this ever happened again; The Dodd Frank Act implemented and set laws into place to make sure that banks and financial

In recent years, financial organizations have been bailed out to prevent the financial collapse of the economy. The Troubled Asset Relief Program (TARP) provided relief funds to financial institutions. This program is a part of the Emergency Economic Stabilization Act of 2008. While controversial, the Obama administration determined it was necessary to prevent worldwide economic failure. This bail out was necessary to add stability to the financial markets after high-risk investments and fraudulent practices of the largest banking institutions in the US

In 2012, the Troubled Asset Relief Program (TARP) it was a $700 billion banking rescue package enacted in late 2008. TARP rescued the banking and auto industries, provided loan guarantees, and helped stave off mortgage foreclosures. The government $430 billion of the total $700 billion approved. After repayments and a $25 billion profit, “the TARP’s ultimate net cost to the taxpayers was just $32 billion,” according to March 2012 estimates by the Congressional Budget Office. The TARP program succeeded in helping the economy recover and stabilizing the banking sector. One 2011 study showed that without TARP and other crisis management policies, US GDP would have been 6% lower, the unemployment rate 3% higher and almost five million more people

In this case study, Vancity’s CEO, Vrooman, is faced with making the tough decision of deciding if her organization is in a position to reprice its line of credit offerings, in order to stay afloat and competitive, and at the same time, not loose the trust of its customers, who also happens to be the owners. Furthermore, the study showcases how Vancity’s innovative value to adapt to the changing needs in their community gives them a competitive advantage amongst other financial institution. This case is important as it explains tough decisions that top executives and organizations as a whole, are often faced with making, in order to stay competitive and profitable. It also discusses the financial impacts of the recession in the late 2000s on the Canadian economy, particularly the financial industry. This paper will begin with an introduction to this case, discussing the financial industry, and its impact on the Canadian economy, also to be accompanied with some background information on the case study. This will be followed with an analysis of the case study and I will then determine possible decisions that could be taken, and the merits/drawbacks of each decision. At this point, I will elaborate on what decision I think would be ideal and provide the best outcome of benefitting both the organization and its customers.

“Congress authorized Treasury to use TARP in a manner that protects home values, college funds, retirement accounts, and life savings; . . . preserves homeownership and promotes jobs and economic growth; . . . and maximizes overall returns

This was to help good banks from collapsing because lenders were panicking. The government eventually came up with a program called tarp also known as the troubled assets relief program. This program gave 700 billion dollars to help sure up banks. White, L. H. (2009, August 1). Housing Finance and the 2008 Financial Crisis. Retrieved November 3, 2016, from https://www.downsizinggovernment.org/hud/housing-finance-2008-financial-crisis. This helped stop all the panicking in the financial system. Congress later on incorporated a stimulus package which gave the economy over 800 billion dollars from new spending and tax cuts. Amadeo, Kimberly Subprime mortgage crises: Effect and Timeline. (2016, September 8) Retrieved from: https://www.thebalance.com/treasury-yields-3305741)) This helped slow down the fall in the economy. In 2010 congress also passed a law named the DODD Frank law which basically stopped banks from taking big

1. Has the inflation rate in Canada increased or decreased in the past few years? What about interest rates?

What is a financial intermediary? A financial intermediary is an organization that raises money from investors and provides financing for individuals, companies and other organizations. Intermediaries are a stop on the road between savings and real investment. Mutual funds and pension funds are two important classes of intermediaries. A financial institution usually suggests a more complicated intermediary doing more than just pooling and investing savings. Banks and insurance companies are good examples.

The program creates capital for healthy banks so a bank can sustain liquidity in credit markets. This is fundamentally to stabilize the credit crunch. The Reserves created many programs under Tarp to help alleviate the U.S. financial system, revive economic development, and avoid foreclosures. This was just one element to confront the subprime mortgage crisis. TowneBank was a “healthy” bank, so the Federal Reserve presented $76 million as part of the Troubled Asset Relief Program. Agreeing to take apart of TARP would make some of TowneBank’s investors believe there was trouble in management, and some believed that accepting TARP funds would lead to government interruption to their bank. TowneBank accepting the Tarp fund was a good decision as it provides a financial cushion if the economy and financial services industry collapsed. This was something many bankers feared because during the time they had never seen a crisis of this degree. The board of directors could also put the $76 million to good

Aurora Borealis LLC is a hedge fund that has around $ 3 billion under management and they are currently targeting William Wrigley Jr. Company to make their next investment. William Wrigley Jr. Company is the biggest chewing gum manufacturer in the world and it has no debt yet. Aurora Borealis is trying to convince Wrigley to do a

The Financial System Inquiry (FSI) acts as a model for achieving a resilient and efficient financial system, contributing to Australia’s economic growth. The Capital requirements implemented according to the FSI has potential impacts on Australian banking system:

The financial service industry comprises of securities and commodities sector, banking sector, insurance and real estate sector. Other industries have finance departments that require professionals with finance qualifications. There is a very strong occupational outlook in this field, and there is a shortage of the right talent to fill these talents. One of the hot job categories is in the field of financial planning and analysis. Financial Planning and Analysis is less focused on the routine transaction processing and more focused on forward-looking strategy and analysis for the business. The roles of financial planners have dramatically changed. Factors such as a breakthrough in technology and changes in retirement planning have caused

There are over 46 companies that exist within the banking industry. Citigroup, Wells Fargo, Bank of America, J.P Morgan Chase and several others. The competitors are relatively equal in size, however, they have different ranging revenues. The four major competitors consist of Citigroup, Bank of America, J.P Morgan Chase, and Wells Fargo. Revenues for Citigroup Inc. were reported at $76 billion in 2014, Bank of America was reported at $100 billion, and $96 billion for J.P Morgan Chase. Wells Fargo lags behind with $26 billion in revenues. Each banking company had roughly around 200,000 employees. Another competitor includes the Commercial Bank of China with revenues totaling $2.8 billion. Each bank has an average of $2 billion in assets, so not one bank has more than the other.

"Barclays boss Bob Diamond has said that taxpayers should not bail out banks, and that those banks that get into trouble should be allowed to fail."

The banking industry has always been susceptible to economic fluctuations. The subprime mortgages crisis, that started to be felt in 2007 and is still going on, is not an exception. Although it had consequences all over the world, the main effects were seen in American financial markets, followed by the European ones. The top ten banks of the world also suffered the consequences; these can be seen in the changes occurred among these leading institutions in terms of market capitalization and also total assets. After several years of believing in free markets, capitalism and no government intervention, the whole scene has changed. During this period, the governments, acting together with their respective central banks, assumed