Financial Reform in India

One economic policy was that “the Federal Reserve had raised interest rates in hopes of slowing the rapid rise in stock prices” (Romer, 3). At the time the “stock prices had risen more than fourfold from the low of 1920”

The Indian economy following the 1991 crisis swiftly moved away from central planning economy towards market-based economy with the government having less intervention and control. As a result, companies were operating in what is called emerging

Up until the 1880s, the United States economy followed the policy of laissez-faire (the idea that the government should have no involvement in the economy), and this led to competition which led to good prices of goods for the average consumer. However with the growth of many large companies that controlled the market, prices of goods raised due to the lack of competition. With consumers becoming frustrated and prices constantly rising, the government was forced to regulate the control of monopolies in the market.

It is very vital to implement rules, regulations and guidelines that are necessary so that individuals and organizations remain in compliance with the law. These set of polices help protect an organization from possible legal action or being penalized. It also, allows everyone to understand what is expected of them within any nature of business. Without guidelines and policies set forth by the government more than likely it would result in a breakdown in social structure, and it would result in unjust circumstances. Over the years the United States government has set many business regulations in place to safeguard consumer’s rights, protect society and hold corporations responsible for the power they have in our

So what you had was again government getting in the way of sound business practices. Forcing banks and other

As the British took control of India, it found ways to make India better and with its help, soon enough, India was placed as the second best economy under the British economy (British 12). India’s economy and trade had improved tremendously after the British took over because there was more money coming into India to cause such a rise in its economy. The British also built railroads which created more ease when transporting goods and trading throughout India. The railroads allowed supplies and goods to be exported quickly, bringing it to the ports. Goods that would usually take months to be traded with others now only took a few days with the installment of railroads (Fisher 348). The railroads in India impacted everyone not just the merchants and businessmen in India. But, it was especially beneficial for them because now they could make deals and have goods be transported to them without a long wait. Nevertheless it seem to be that with these new installments India could run smoothly but eventually a problem came along the way. The British did not allow Indians to make their own goods, they banned homemade crafts and since most of India was out of work, the Indians turned to the fields. Work was hard and there were certain goods they needed like clothes so they had to buy it from the British since they could no longer make it themselves from the cotton they collected. Craftsmen became farmers to pay for goods and live a stable life (Bose 53). The British had wanted to get rid of the competition for goods so they decided they want to prevent the Indians from making their own goods. That way if the Indians needed something they can only get it from the British (Bose 53). This led to economic downfall for the Indians because while they were not doing great before the British came, their economy was pretty

The global economic depression of the 1930 's combined with the two world wars was crucial in establishing early seeds of economic development in India. During the global

Government involvement in a market economy is necessary only when the industry is systemically important to the overall functioning of the economy. In many instances, little government involvement is beneficial to the market economy as it allows competitive forces to dictate operating results. For one, government involvement occasionally undermines the competitive climate of industry. Capitalism is predicated on innovation and profit motives to drive business results. With government intervention, this incentive is dramatically abated as firms are reluctant to innovate. However, in the case of systemically important institutions, government oversight is indeed needed. The most recent example occurred with the financial crisis of 2008. In this particular instance, government intervention was needed to insure the stability and confidence within the market economy. As confidence in the market declines, so too does the prevalence of capital. Overly pessimistic views of a market economy can cripple much need liquidity in the system. As a result, government involvement is needed to instill confidence within the overall system. In regards to the banking industry example, capital requirements have been implemented by government to insure the safety and viability of the market economy as a whole.

The finance industry is primarily a service industry and therefore is there to serve people. The power taken and given to this industry does not represent a democracy. In 1982, even though it goes against the Glass-Steagall Act of 1933 (passed after the Great Depression in order to control banks and prohibit commercial banks from using depositor’s savings to invest in speculative instruments), the Reagan administration enabled the deregulation of the American financial market.

Regulatory constraints brought about the inflation demand for products thus seeing Fannie Mae and Freddie Mac getting the approval of investing in these securities. (Mian et al, 2008). Another source of captive demand was the money market funds. This boosted their yields since they were required to hold only the high rated securities. The managers that funded these securities knew well what gamble they were playing with these funds but could not resist the temptations and benefit it came with them. The managers also hoped that if any shock arose from these funds, their immediate competitors would also face the same consequences which would result in a reduced reputational cost and this may result in the government interference and may end up supporting these companies through incentives and lowering of taxation. The problem was even strict and severe in the short bond funds. In contrast to the market funds, short bonds fund are not restricted to the types of gadgets they can own. Generally the regulation relies greatly on credit- rating agencies procedures of risks without understanding the incentive created on the

Deregulation is believed to be one of the major factors that led to the 2008 Financial Crisis. Deregulation refers to the reduction of governmental influence in an industry in order to create more competition (“Deregulation”, 2015). The reduction in government influence creates a more competitive market that

The purpose of this paper is to show that the “regulatory capture” has played a role not easily measurable in causing the global financial crisis. To illustrate this, the first step will to describe the “regulatory capture” in its three possible qualifications; then, I will explain, providing some examples, how each of these categories played a possible role in posing the basis for the financial crisis. While illustrating the different forms of capture I will present some questions that leave space to different answers. Finally, I will conclude that the regulatory capture have surely played a role in generating the crisis, but it is not possible to evaluate the effective role it had in causing it.

The goal of financial regulation is to increase efficiency in the market, as well as enhance the market 's ability to absorb shock caused by financial instability. There are many reasons for financial instability, but it can be narrowed down to

The appropriate role of government in the economy is different from a typical liberal stance. Although the economy is an ever-changing machine that rises and falls due to no fault of its own some feel that government regulation is needed. Without government regulation in the economy, free market trade could set the bar for interest rates, trade tax, business monopolies, and currency value. “…the safety of the republic lay in the autocratic strength of its government…” this quote from Franklin Roosevelt’s Commonwealth Club Address displays how the main objective for a strong central government is to protect the people. To further protect the people of the United States, the presences of a strong government in the financial sector is crucial to prohibit the use of banks raising the interest rates to a level where

It is well established that good corporate governance practice is beneficial for firms, its stakeholders and whole economy. Further based on studies such as by Levine (2004), saving rates, investment decisions, technological progress and consequently economic growth are encouraged as financial systems reduce market frictions. So developing countries require reforms to stimulate financial system for revival of economy.