Impact of Financial Regulations

Additionally, when America’s economy was melting in 2008, the Federal Reserve played a big role to stabilize it. Besides the Great Depression during the years 1929 through 1939 the worst economic time for the United States, 2008 was unmistakable one of the worst years of America’s economy history. When this economic recession was taking place, the Fed had to take action to avoid another depression and to stop a fall from the financial system. With the help of the Federal Reserve J.P. Morgan Chase and Co.’s they planned to help Bear Stearns (an investment bank) with financial assistance to help the government to buyout AIG, a well-known insurance company. This helped to produce a strategy targeting to stabilize the credit market and also the short-term interest rate from 45% to almost 0 from the benchmark (Coste). Thanks to the Federal Reserve and their well design plan to avoid another recession they prevented the economy of the world or better known as Macroeconomic system from falling and getting it

Our economy is a machine that is ran by humans. A machine can only be as good as the person who makes it. This makes our economy susceptible to human error. A couple years ago the United States faced one of the greatest financial crisis since the Great Depression, which was the Great Recession. The Great Recession was a severe economic downturn that occurred in 2008 following the burst of the housing market. The government tried passing bills to see if anything would help it from becoming another Great Depression. Trying to aid the government was the Federal Reserve. The Federal Reserve went through a couple strategies in order to help the economy recover. The Federal Reserve provided three major strategies to start moving the economy in a better direction. The first strategy was primarily focused on the central bank’s role of the lender of last resort. The second strategy was meant to provide provision of liquidity directly to borrowers and investors in key credit markets. The last strategy was for the Federal Reserve to expand its open market operations to support the credit markets still working, as well as trying to push long term interest rates down. Since time has passed on since the Great Recession it has been a long road. In this essay we will take a time to reflect on these strategies to see how they helped.

In the late 2007, early 2008 the United States and the world was hit with the most serious economic downturn since The Great Depression in 1929. During this time the Federal Reserve played a huge role in assuring that it would not turn into the second Great Depression. In this paper, we will be discussing what the Federal Reserve did during this time, including a discussion of our nation’s three main economic goals which are GDP, employment, and inflation. My goal is to describe the historic monetary and fiscal policy efforts undertaken by the U.S. Government and Federal Reserve, including both the traditional and non-traditional measures to ease credit markets and stimulate the economy.

But there are some indicators that that is not responsible either. Detailed studies have been done to compare post-war business cycles with prior ones. At least one indicates that there was no improvement. Obvert Lucas made a key insight into the difficulties of managing the economy. Looking at post-World War II business Cycles, he argued that if one could choose between smoothing out the cycles completely and increasing the annual economic Growth by 0.1%, the latter would make people better off overall. As we consider the different policy options, it is important to keep this insight in mind as one more trade off that has to be considered. <br><br>The Federal Reserve Board was created in 1913. Ostensibly, it was to act as the lender of last resort to prevent bank panics like the one that had occurred in 1907. Although some conspiracy minded folks might weave elaborate tales regarding its Creation, the reason is rather straightforward. The big banks simply wanted government protection and bailouts and were more than willing to endure a little government regulation in return. Like the Interstate Commerce Commission before it, the Federal Government would be staffed with people from the industry that it was supposedly a watchdog over and who would most likely feel that what's good for banks are good for America? Throughout the years preceding the Stock Market crash, the Federal Government did just that. The Federal Government set

The financial crisis that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’

The collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. Considered by many economists to have been the worst financial crisis since the Great depression of the 1930s. Economist Peter Morici coined the term the “The Great Recession” to describe the period. While the causes are still being debated, many ramifications are clear and include the failure of major corporations, large declines in asset values (some estimates put the drop in the trillions of dollars range), substantial government intervention across the globe, and a significant decline in economic activity. Both regulatory and market based solutions have been proposed or executed to attempt to combat the causes and effects of the crisis.

In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary

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

When financial restrictions bring about nothing but deterioration the economy, the country will opt for a liberalisation to lessen government regulation and restriction in the financial market. Financial market liberalisation eliminates restrictions on financial institution and market domestically. This liberalisation strategy intends to free the flow of capital in and out of a country and encourage economic development. The purpose of removing restrictions on the market is to allow capital inflows from developed countries that would finance the emerging market to higher investment and growth, for insurance against shocks and volatile consumption, and spur development of domestic financial market. By lifting these financial restrictions, domestic financial market opens up to the international market allowing market forces to drive the market operation more effectively. In addition, it should achieve an efficient capital allocation and better sharing of individual risk. Emerging market economies generally refers to economies in an earlier stage of market development that have recently opened up to world. Emerging market nations liberalise their financial system with high hope of economic growth and reduced poverty. Their capability to manage a market liberalisation in order to enjoy its anticipated benefits is questionable. Being far from a developed country, emerging

Conventional financial repression theories right from its inception by Shaw (1973) and McKinnon (1973) have always claimed that both credit and interest rates controls are detrimental to economic performance. For instance Fry (1978), Shaw (1973), Kapur (1976) and Matheison (1980) all argued that

The Capital market in any country is one of the major pillars of long-term economic growth and development. The market serves a broad range of clientele, including different levels of government, corporate bodies and individuals within and outside the country. Capital formation entails accumulated savings out of the current incomes of either organization or individual. It is investment in fixed assets which in part is financed with monies raised through the capital market (Al-Faki, 2006). The Capital market has been one of the major means through which foreign funds are injected into most economies and the tendency towards a global economy is more visible there than anywhere else. It is therefore, quite valid to state that the growth of the capital market has become one of the barometers for measuring the overall economic growth of a nation (Emenuga, 1998).

Today, it is considered to be a common knowledge, that the deregulation of domestic financial sector and opening of capital account of the balance of payments played a major role in the recent economic crisis of 2007-08. Policies, that have been stated above can be put together and named as the liberalization of the capital account. Liberalization stands for lessening of government regulations and restrictions in the economy. It offers a certain sector of the economy an opportunity to compete internationally. However, there are a number of risks connected with liberalization, which will be discussed later in this paper. Thus, the question is as follows: is liberalization worth the risk, or a wise implementation of capital controls leads to potentially more positive outcomes for the global economy?

Financial systems and financial regulators are entities setup by the government of a country to ensure the availability and flow of financial resources in a fair and lawful manner without exploitation or monopolization of the resource by individuals or organizations. The task of ensuring the availability of finance and its transference is taken up by the financial systems of a country while the task of monitoring and regulating is taken up by the financial regulator.

An efficient financial sector will have its impact on economic well-being of any country by efficiently managing its financial resources. Meanwhile an efficient banking sector, usually a dominant entity in the financial sector, would uplift the well-being of the society especially through improved profitability, greater amounts of intermediated funds, better prices and increased financial system 's strength and stability. Such banking system which efficiently channels financial resources to productive use, is a powerful mechanism for long run economic growth [Levine (1997)].