The Pros And Cons Of The Financial Crisis

“Lehman Collapse Sends Shockwave around the World” Reads the British newspaper, The Times, as the world sinks further into the recession in September 2008. The housing collapse was orchestrated and perpetrated by a system created by investment banks to allow them to make money, by keep the American people in debt, even when the banks knew the loans would default. The investing banking system was left unchecked by the United States government because it did not have the regulations as did the depository banks. There was immoral investing in people’s retirement, pensions, and homes where it created at housing collapse, in which thousands of people over paid in their subprime loans and lost their homes in the process. The federal Reserve is a very selfish and heartless entity in America that has had powerful influence in American politics for decades. The Federal Reserve must be dissolved and succeeded by a federalized entity that has no obligation to any investors. It must contain checks and balances to create a fair playing field. It must not benefit one group of people, but the nation as a whole. Finally, the new banking structure must be solid to keep necessities at steady prices, and must not work on speculation. Prior to “the Fed”, two previous central banking systems were in place, but were limited on how long they influenced (both twenty years) their interest in government, and twice, both banking system were not allowed renewal because many political figures,

On account of the Wallstreet stock market crash which took place in 1929, the nation was put in a huge financial stress. Many people rushed to banks to take out their savings but once they got there, there was no money left. About eight-hundred banks closed and nine million bank accounts crashed (ABC News). Every cent that a family ever

Before the advent of the Federal Deposit Insurance Corporation (FDIC) in 1933 and the general conception of government safety nets, the United States banking industry was quite different than it is today. Depositors assumed substantial default risk and even the slightest changes in consumer confidence could result in complete turmoil within the banking world. In addition, bank managers had almost complete discretion over operations. However, today the financial system is among the most heavily government- regulated sectors of the U.S. economy. This drastic change in public policy resulted directly from the industry’s numerous pre-regulatory failures and major disruptions that produced severe economic and social

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 Federal Deposit Insurance Corporation (FDIC) is a government corporation that was established by Congress in 1933. On June 16, 1933, President Franklin Roosevelt signed an Act known as ‘The Banking Act of 1933. The act was created during the Great Recession in order to restore the trust of the public in the American banking system, due to the fact of how frequent bank runs were happening. A bank run is a result of so many people demanding to withdrawal their deposits from the Bank’s reserves, that it leads to the banks becoming insolvent and not being able to return their depositor’s money, which lead to many banks filing for bankruptcy. During this time thousands of banks failed and because of this many people lost faith in the American

In addition, bank closings resulted to the citizens losing their savings and a chaotic situation erupted.Bank failures attributed as one of the causes since more than nine thousand bank failed during the nineteen thirties. The bank deposits became uninsured and this resulted to citizens losing their savings. The banks that survived were too scared to offer loans since the economic situations were uncertain It was caused by such things as fundamental flaws in the prosperity of the 20s '. There will a lot more issues that led to this also a lot that weren’t exactly proven but all signs lead to it. Such as the World War. The world war was a very traumatic time in the american lives and also lead to a lot of destruction which also cause a lot of money to help out everything that happened. There were some many devastating events that took place during this tough time known as the world war that they had to sacrifice money for not only damage but heart break

The banking industry as a whole after the stock market crashed was going bankrupt due to not being able to carry the “bad debt” that was created from using customer money to buy stock. Because the banks were out of money, they were unable to cover customer withdrawals from their bank, causing many bank customers to lose all of their savings. With the uncertainty of the future of the banking industry, many people withdrew all of their savings, which caused more than 9,000 banks to close their doors and go out of business (Kelly). Due to the effects of the Great Depression, and the collapse of the banking industry, the government created regulations to prevent similar failure in the future. For Example, the SEC, (or Securities Exchange Commission), which regulates the sell and trade of stocks, bonds and other investments was created as a result of The Great Depression. The FDIC (or Federal Deposit Insurance Corporation), was created to insure bank accounts so that that the consumer would be protected if the bank were to go out of business (Kelly). The Great Depression's effect on the banking industry led to many useful changes to the banking industry and helped restore confidence in banks in the American people.

Another major cause behind this was the fact that commercial banks and institutions had invested their customer savings in the stock market which resulted in millions of people losing their life’s savings.

President Franklin D. Roosevelt, arguably one of the most famous Presidents because of his work during such a difficult time took office in 1933. Roosevelt came into office with a bold plan and acted on it swiftly, providing jobs and relief for those in need. “Over the next eight years, the government instituted a series of experimental projects and programs, known collectively as the New Deal, that aimed to restore some measure of dignity and prosperity to many Americans. More than that, Roosevelt’s New Deal permanently changed the federal government’s relationship to the U.S. populace.” The New Deal consisted of a number of government-funded programs. For my purpose though, I want to focus on the Bank Act of 1933. The Bill was sponsored by Sen. Carter Glass (D-VA) and Rep. Henry Steagall (D-AL) and signed into law by Roosevelt in 1933. This policy change set up the banking industry for a successful recovery and a strong future. The Bank Act of 1933 contained many goals. One of the most crucial successes of this law was that commercial banking and investment banking were now completely separate. This interaction had been a problem due to overlap in business practices that weren’t morally right. Another system of value that came from this act was the Federal Deposit Insurance Corporation or FDIC, as many of us know it today. What the FDIC does is insure deposits up to a certain amount. This was great for the clients of the bank and brought back a sense of security among the

After the stock market crash and the banks began to close the public started to lose faith in the nation’s economy. These events are partly responsible for the Great Depression. The public began to withdraw their money from banks causing even more damage. In an effort to improve the situation President Roosevelt and congress passed the Emergency Banking Relief Act and the Federal Deposit Insurance Corporation Act. “Confidence was further enhanced by the creation of the Federal Deposit Insurance Corporation (FDIC), under the Banking Act of 1933, passed in June, which guaranteed that government insured all bank deposits up to $5,000”(Barnes & Bowles, 2014). These acts restored the public’s confidence back into banks and encouraged the public

The Great Recession is a term that mirrors a sharp decline in cash related measures toward the complete of 2000, which is all things considered idea to be the most detectably horrendous recession since the Great Depression. The articulation "recession is astounding" implies the recession in the US, formally continued going from December 2007 to June 2009 and the overall money related downturn that determined in 2009. The abatement in subsidize began when the US lodging market burst in the chest and many home credits and securities secured by subordinated assessed adversities.

The majority of America’s banks are small individual institutions that had to rely on their own resources. This resumed as being unbeneficial for people because these banks were not stable, in terms of keeping Americans’ money cycling properly through banking systems. When there was a panic, depositors rushed to take their money out of the banks. The banks sank if they did not have enough money on reserve. This eventually left banks in the dust.

After the stock market crashed in 1929, Americans began to scramble to the banks to withdraw their money. As a result, thousands of financial institutions failed. This became known as the Great Depression. In 1933, President Roosevelt created the Federal Deposit Insurance Corporation, which would insure deposits to a certain limit with money pooled by other banks. This not only meant that people’s money was safe, but it boosted the confidence of the citizens. Taking action against the bank failures

In March of 1933, most the banking systems were suspended, due to commercial banks being involved in the buying and selling of stocks, which contributed to the crash of the stock market. Therefore, president Roosevelt initiated the Glass-Steagall Act, which barred commercial banks from being involved in the malpractices, that once lead towards the crash of the stock market. Under this federal law, the Federal Deposit Insurance Corporation (FDIC) was established, insuring the accounts of individuals against bank failure. This law insured deposits of up to $250,000 for individuals who deposited in banks. This law was a means to restore the confidence in the banking system because during the banking failure, people began to mistrust financial institutions, afraid that they would not be reimbursed for their money. Both the Glass-Steagall Act and the Federal Deposit Insurance Corporation, rescued the financial systems and helped the federal government regulate it. Between 1929 and 1933, around 5,000 banks had failed, however, after the legislation of these two laws, not a single bank in the United States failed

This chapter is about the background of 2007-2008 financial crisis. The 2007-2008 financial crisis has a huge impact on US banking system and how the banks operate and how they are regulated after the financial turmoil. This financial crisis started with difficulty of rolling over asset backed commercial papers in the summer of 2007 due to uncertainty on the liquidity of mortgage backed securities and questions about the soundness of banks and non-bank financial institutes when interest rate continued to go up at a faster pace since 2004. In March 2008 the second wave of liquidity loss occurred after US government decided to bailout Bear Stearns and some commercial banks, then other financial institutions took it as a warning of financial difficulty of their peers. In the meantime banks started hoarding cash and reserve instead of lending out to fellow banks and corporations. The third wave of credit crunch which eventually brought down US financial system and spread over the globe was Lehman Brother’s bankruptcy in August 2008. Many major commercial banks in US held structured products and commercial papers of Lehman Brother, as a result, they suffered a great loss as Lehman Brother went into insolvency. This panic of bank insolvency caused loss of liquidity in both commercial paper market and inter-bank market. Still banks were reluctant to turn to US government or Federal Reserve as this kind of action might indicate delicacy of