Outcomes of the Deregulation of Financial Markets

639 Words2 Pages
Connor, Flavin and O’Kelly (2010), Stated that Deregulation of Financial Markets & Large Capital flow (Bonanza) were two of the four main reasons of both US & Irish Bank Crisis.(Ref 1. Connor, Flavin and O’Kelly (2010), the other two being Irrational exuberance & Moral Hazard.
Deregulation of Financial Markets
President Obama on Jan 22, 2010 in effect signed a bill, advising Americans that never again would the American Taxpayer be held hostage for a bank that felt they were too big to fail, he pulled America banking & in effect put global extension banking back to 1930’s with strict regulations that was basis of all banking institutions before deregulation came in. This was needed for banks to go back to basics & to stop running their own private trading desks, investing or owning hedge funds or private equity funds. This in effect took risks away from banks core business, balance sheets which meant if another crisis hit the banks could still function & not impact banking systems. This was a turning point. Banks doing what they liked when they liked was gone forever. Ref2. (http://www.davidmcwilliams.ie/?s=deregulation+of+financial+markets)
How did it get so bad?
1. Deregulation of financial markets meant banks found new ways of lending & encouraged more risky loan approvals with no controls.
2. Risks were being insured against CDS – Credit default swaps.
3. Banks in US to ensure
Open Document