The Impact Of Technology On The Financial Sector

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is commonly referred as the Dodd-Frank Act. This act was passed as a response to the Great Recession in order to prevent potential financial debacle in the future. This regulation has a significant impact on American financial services industry by placing major changes on the financial regulation and agencies since the Great Depression. This paper examines the history and impact of Dodd-Frank Act on American financial services industry.

A Colossal Failure of Common Sense was one of many books to be published in the aftermath of the Financial Crisis of 2007. After seeing the global economy stall in the face of massive losses in word financial markets, many Americans sought to better understand the crisis and its causes. This book, written from the perspective of a financial market insider, provides a glimpse into the world of global finance and also seeks to explain how the players in this world were involved in the crisis. In the words of the author Lawrence McDonald, “My objective in writing A Colossal Failure of Common Sense was twofold. First, to provide … a close-up, inside view of how markets really work…..And, second, to give… as crystal clear an explanation as possible about the real reasons why the legendary Lehman Brothers met with such a swift end”1. By writing about his personal experience at Lehman Brothers and recounting stories from within the famous investment banking firm, Mr. McDonald largely succeeds at his first goal. However, the elements of personal biography and the chronological order of the book make it difficult for the reader to fully appreciate all of the varied causes of the financial crash. I believe that the main value of reading this book is in understanding these causes, with Lehman Brothers acting as a microcosm of the greater financial universe. As such, in this review I have isolated elements from Mr. McDonald’s book which highlight how the crisis

It can influence important decisions such as investment choices. People started to associate technology with successful business performance. “Over the past few decades, technology usage has grown significantly. Per the U.S. Census, 76% of households reported having a computer in 2011.” (The Leon Journal of Undergraduate Research in Communications).

The Dodd-Frank Act was enacted to deal with the various problems occurred in the financial crisis. The paramount reason I choose this law is it has brought the most significant changes in the federal financial regulation since the regulatory reform that followed the Great Depression. (Damian & Lucchetti, 2010)

In 2008, when the financial crisis occurred, millions of Americans were left without jobs and trillions of dollars of wealth was lost wealth. To make sure the Great Recession would not happen again, President Barrack Obama put into effect the Dodd- Frank Act. With the help of this law, banks will not be able to take irresponsible risks that had negative effects on the American people. Furthermore, with the Volcker Rule embedded into the act, it will ensure that banks are no longer allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their

The United States has one of the biggest and fastest growing economies of the world. Our financial system has been affected by numerous crises throughout the years and as a result Congress has reacted in the most recent times and two well-known acts have been signed into laws by the presidents at the time to protect investors and consumers alike. A brief overview of the Sarbanes-Oxley Act of 2002, a discussion of some of the provisions therein, opinions of others regarding the act and also my personal and professional opinion will be discussed below. The same will be examined about the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Great Recession inflicted abundant harm in the U.S. and global economy; 8.7 million jobs vanished (Center on Budget), 9.3 million Americans lost their homes (Kusisto), and the U.S. GDP fell below what the economy was capable to produce (Center on Budget). The financial crisis was unforeseen by millions and few predicted that the market would enter a recession. Due to the impact that the recession had, several studies have been conducted in order to determine what caused the recession and if it could have been prevented. Government intervention played a key role in the crisis by providing the bailout money that saved those “Too Big to Fail” institutions. Due to the amount of money invested in the bailout and the damage that the financial crisis had on the U.S. population, “Too Big to Fail Banks”, and financial regulation are two of the biggest focuses of the presidential candidates. Politicians might assure voters that change will occur, but is it to late for change to be efficient, are the financial institutions making the same mistakes that led to the financial crisis?

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed to redesign numerous areas of the US regulatory system and to protect consumers against mortgage companies, banks, and other entities that were gambling and taking excessive risks with the consumers’ financial assets7. The act promised to restore America and create new jobs for those who had lost everything during the financial crisis of 2008. When the crisis occurred, Wall Street “did not have the tools to break apart or wind down a failing financial firm without putting the American taxpayer and the entire financial system at risk,” and Washington did not have the power to oversee and limit the risk-taking behavior that was taking place at the time7. The act is composed of sixteen titles, each one can be considered a powerful law individually; however, the act comprised them all together to have a major impact on the economy.

The financial crisis of 2007-2009 resulted from a variety of external factors and market incentives, in combination with the housing price bubble in the United States. When high levels of bank and consumer leverage appeared, rising consumption caused increasingly risky lending, shown in the laxity in the standard of securities ' screening and riskier mortgages. As a consequence, the high default rate of these risky subprime mortgages incurred the burst of the housing bubble and increased defaults. Finally, liquidity rapidly shrank in the United States, giving rise to the financial crisis which later spread worldwide (Thakor, 2015). However, in the beginning of the era in which this chain of events took place, deregulation was widely practiced, as the regulations and restrictions of the economic and business markets were regarded as barriers to further development (Orhangazi, 2014). Expanded deregulation primarily influenced the factors leading to the crisis. The aim of this paper is to discuss whether or not deregulation was the main underlying reason for the 2007/08 financial crisis. I will argue that deregulation was the underlying cause due to the fact that the most important origins of the crisis — the explosion of financial innovation, leverage, securitisation, shadow banking and human greed — were based on deregulation. My argument is presented in three stages. The first section examines deregulation policies which resulted in the expansion of financial innovation and

The relative successes and failures of that Act are becoming more apparent with time, and the shortcomings are subject to intense partisan criticism. As discussed below, Dodd-Frank seeks to address the highly sensitive and controversial notion that Wall Street banks have been designated by the Federal Reserve as too-big-to-fail. In fact, during the most severe moments of the crisis, the voices of free market proponents could be heard advocating that these troubled big banks, suffering massive losses due to their own bad bets, and if weakened to the point of failure, should be allowed to fail. Hindsight shows that allowing just one to fail, Lehman Brothers, had serious and lasting detrimental effect on the US and global financial system and markets. Had Lehman been saved, it would have been the most effective agent to unwind all of the transactions and trades to which it was a party, and likely in a rapid manner. However, being thrust into bankruptcy, and thereafter receivers were appointed to unwind the business, took months upon months and vast resources to settle Lehman accounts. Had Citibank, Bank of America, Bear Stearns, or AIG been allowed to fail, it may have been possible that the US financial system would have melted down completely. So these super banks, and non-banks, cannot be allowed to fail in crisis, due to the system-wide risk. Notwithstanding, such an implicit assurance, that they will always get a bailout, no matter how toxic

Over the past few years technology has caused significant changes in the way enterprises conduct business.

The change and advancement in technology are a significant factor in the banking business. Technology has led to tremendous improvements in this industry. Since the commencement of this millennium, people have shown great love for their mobile phones (Ozaki 1992). It necessitated the invention of mobile applications (APPs). From the introduction of the mobile banking, APP people rarely go to the banks. All their transactions get done simply by the stroke of a finger. Businesses face a challenge of adapting to changes in the technology sector. Mobile banking either through actual investing or any other means is on the rise.

Over the years, technology has become a major part for a business and for an individual as well. Technology has become so advance that it has made a major effect for the staff as well as for the customers. New technology has helped in many areas such as data and information storage, advertising, transportation and communication.

Information technology has an impact on many different aspects of our life. Technology has influenced the economy and on the way people live, communicate and work. The growth and improvement of technology yields to a greater output and huge impact on the economy. Technology innovation provides more efficient and cheaper ways to make existing goods. Many institutions are spending a lot of their revenue on research and development. This resulted in creating new products and new services. Economy has been affected by technology in the number of the increased jobs, the emergence of new and developed services and the use of the Internet to reach customers.

Technological advancement has had a gigantic effect in the banking industry. Over the past few decades, the financial services industry has changed considerably with banking transforming from the pen and paper method to the computers and internet method. The pen and paper method took weeks or even months for the transaction to be eventually completed, and then the dramatic introduction of the computer and internet method which changed that time frame to only a matter of seconds to be completed, which reduced the amount of time and labor needed to complete a transaction significantly. Banking is considered one of the most important economic sectors with it being severely influential and responsive to any little change, whether it is domestic or international. Some extreme changes that were brought about by the development of this new technology turned into a globalized nature for the financial services industry. One stroke of a key on a computer could and would change a person 's life extensively or even have a global impact. The new technologies that were created and introduced changed how the consumers managed their money from that time on. Technology has helped to protect peoples’ hard earned money and make it much more impossible for people to be able to write out bad checks or even holding up a bank. The advancement in technology however, also came with some security risks as most things do, that could affect the money that people trusted with the bank and