World Financial Crisis Requires Regulation of Entire Financial System

The general objective of this policy paper is to deeply understand the latest and most influential financial reforms and the current financial environment in U.S through relatively comprehensive analysis with regard to the Dodd-Frank Act. In doing so, I move forward to provide some suggestions on improving the relevant legislature.

One of the primary factors that can be attributed as to have led the recent financial crisis is the financial deregulation allowing financial institutions a lot of freedom in the way they operated. The manifestation of this was seen in the form of:

Firstly, the Dodd–Frank Act pushes forward the reformation of America's financial regulatory system. Several new regulatory authorities are set up to enhance the government supervision and administration of the industry. The Financial Stability Oversight Council is established to identify material risks to financial stability, with the support from Office of Financial Research. Moreover, Fed is entitled to exercise additional superintendence beyond banks.

Since the onset of the financial crisis 2008, the sovereign debt crisis in western economies and the new financial regulation with Basel III coming up, the financial industry faces the challenge of reinventing itself. The ring-fence for Commercial and Investment Banking, and new economic and regulatory capital requirements will determine the kinds of products banks will be able to distribute. It will have a huge impact in the Investment Banking business, which will suffer tough regulation and supervisory procedures. At the same time, credit risk models will be reviewed because they have failed to predict the crisis of 2008. The current financial and economic crisis doesn’t have any precedent in the past.

Whether a reader agrees or disagrees with how the centralized banking system was created, the foundation for which it was built off of has continued to grow over a century with key fundamentals still in place today. The author’s implications demonstrate that an economists, the intellectuals, were responsible for the banking reform that led to a structured banking system. Could this all have been possible without the influence of the economists? In my opinion, the author has provided enough evidence that would allow the reader to properly analyze and have confidence in the integrity of the article.

Blyth starts his deliberation off with a chapter on America and Europe. He discusses how America was too big to fail and how Europe was too big to bail. He analyses the reasoning as to why the whole world needs to be austere. Blyth explains that austerity is a means to reduce moral hazard. In the early 2000s, Alan Greenspan eased regulatory control in the American Treasury system. In doing so, it allowed for the introduction of new instruments of lending. These instruments can be described as derivatives. After the deregulation within the financial system, the financial banks decided to do what it liked. Blyth depicts what were the causes of the financial disaster were and continues to explore the repercussions of the post Lehman Brothers trauma.

One of the principal functions of the Federal Reserve in achieving this goal is to regulate and supervise various financial entities. It performs this function, in part, through microprudential regulation and supervision of banks; holding companies and their affiliates; and other entities, including nonbank financial companies that the Financial Stability Oversight Council (FSOC) has determined should be supervised by the Board and subject to prudential standards. In addition, the Federal Reserve engages in “macroprudential” supervision and regulation that looks beyond the safety and soundness of individual institutions to promote the stability of the financial system as a

On 4th February 2013 the Financial Services (Banking Reform) Bill (the Bill) was introduced to Parliament. This Bill has sought to implement the ring-fencing proposals of the UK Independent Commission of Banking (ICB), which is also known as the Vickers report. The Bill also represents the UK’s response to wider international calls to structurally reform banks, such as the Liikanen reports’ proposals on reforming the structure of the EU banking sector .

This gathering of governor was joined by leading academics, thought leaders, and commentators on monetary policy. The world of modern central banking and global finance had now entered a new phase of even more obvious artificiality and distortions. According to the author, Mohamed. El-Erian, “Ones whose skillful management of the price and quantity of money in an economy was key to containing inflation, promoting economic growth, and avoiding financial crises.” Since the global financial crisis of 2008, central bank has ventured, by necessity but not by the choice. They set the interest rates higher. For an unusually prolonged period, the central bank was bold policy experimentation. During that time, many of the economists thought that central banks had been forced to operate, and many of them wondered about it consequences. From the beginning of the financial crisis, there was the hope that courageous and responsive central banks would succeed in handing off the baton to high growth, robust job creation, price stability, and financial system. The world was in the process of grow out of its debts problems avoiding the debt defaults because the policy making entities were finally in the economic governance responsibilities and with the job returning and economic prosperity. The world changed in two important ways: one had to do with the analytics of central banking,

However, Bernanke admonished investors by the book that even though banking regulation and supervision protect investors as always, if some particular events or financial crisis happened, like housing bubble and mortgage markets crisis, either or both of these two system work. The example in the book is booming house prices in 2000s. After the sharply increasing of housing prices, risky mortgage lending likes subprime lending trouble began surfacing in 2006 and 2007. The risky mortgage comes with more demand for housing, which will again push the housing prices higher and higher, reinforcing a vicious cycle. As a result, because of the nominate housing price is much higher than the real price, the careful lenders who have good credit step out the market, the rest of borrowers are subprime lenders, “some borrowers were defaulting on loan after making only a few, or even no, payments.” (318) In the book, Bernanke conceded that Fed responded the trouble slowly and cautiously. When Board in Washington determined to make supervision of bank more centralized, he still overconfidently believe that Reserve Bank staff were better informed about condition in their districts. Another Bernanke’s conceit is that the financial regulatory system was not as stable and comprehensive as he thought before the financial crisis. In

This paper will address the government policies in place that lead to the deterioration of lending standards, and the cycle being fueled by the practice of securitization, and thus resulting in the subprime mortgage crash.

During the recent financial crisis, a number of banks were bailed out with public funds because they were considered "too big to fail". The level of state support was unprecedented1. While this may have been necessary to prevent widespread disruption to the financial markets and real economy, it is clearly undesirable for taxpayers' money to be used in this way at the expense of other public objectives. In the future, the financial system must be more stable and banks must be permitted to fail in an orderly manner, so that government bail-outs are not needed.

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.

This weeks unit covered the different thoughts on economic stabilization; Keynesian and Neo Classical, as well as money and its role with banking. It explained the main foundation of Keynesian is that the price is mainly stationary while the aggregate demand is what will cause growth or recession. It views aggregate demand being influenced by; consumption, investments, government spending, and net exports. The supply and price is set by how much of a product is desired by the market and in times of recession government spending should be used to stabilize and stimulate economic growth. Neo classical on the other hand believes in looking at the long run and does not believe in focusing on short term problems such as recess, as these will naturally work themselves out. Neo Classical sees no benefit to inflation and puts more emphasis on the supply curve as a primary factor as to what determines aggregate demand. Lastly, money is the primary means of currency to trade goods and services to avoid needing a “Double Coincidence of wants”. The banks primary job is to act as a giant money pot where people put money they want to save for later into and they by allowing someone else to use that money in the mean time, understanding that individual will pay the money back. Banks act as the middle man and control factor of saving and borrowing of currency on a macroeconomic level. A banks “balance sheet” also known as “T account’ shows the overall health of the bank by

The global financial marketplace is a maze, a tumor, a mess. Scholars are trying to understand this complex system which remains extremely interconnected due to globalization over time. It is extremely important to understand the marketplace because it has an effect on the whole entire world. This marketplace also needs regulations to protect consumers who end up suffering as a result of poor decision-making by financial institutions. The financial marketplace over time has become more and more regulated but still, there is more that needs to be done, both domestically and internationally. How many crises is it going to take for an increase in regulations? There has been the crisis in Thailand, on July 2, 1997, the series of Latin American