The Financial Crisis Deregulation Or Over Regulation

The Financial Crisis: Deregulation or Over-regulation? As evidenced by the plethora of explanations concerning it, the 2007-08 financial crisis that originated in the United-States is highly complex. The literature presents various causes, most of which can be placed on either side of a debate between government intervention and laissez-faire of market mechanisms. On one side, it is argued that financial actors are responsible for the crisis as a result of their use and distribution of complex and risky financial products, and their irresponsible lending. On the other side, the arguments centre on policy failures, or unintended consequences of government initiatives, as interventions into economic mechanisms. Some explanations see both financial markets and policy at the origin of the crisis, and some elements are common to all of these interpretations. Through these varying explanations, we may find certain facts about the time leading up to the crisis, explaining its nature and steps. The three main ingredients of the crisis were the following: a housing bubble, the securitization of mortgages – or Mortgage-Backed Securities (MBSs) – and a credit expansion to leverage financial gains. In its most simple characteristics, the housing bubble was a long-term trend in US housing markets for loans below the quality standard. More precisely, people were buying houses with loans that they had a low chance of repaying, especially considering the unpredictability of markets.Show MoreRelatedDeregulation Is The Underlying Cause Of The 2007 / 08 Financial Crisis1382 Words   |  6 PagesDeregulation is a process that removing or reducing the regulations and allowing banks to invest (MBA lib, 2015). It allows banks to collaborate, and there’s no regulations of derivatives. The Financial crisis in 2007-2008 brought the massive hurt to everyone in the world. The worldwide financial problem affected thirty million people loosing their jobs and cause many cou ntries getting close to go bankrupt (Peah, 2014). This is the global issue that everyone should be consider of. The purpose ofRead MoreFinancial Crisis Essay1119 Words   |  5 Pagesperiods of economic turmoil in the past several decades; the 1979 energy crisis, the Savings and Loans crisis of 1982, the â€Å"Black Monday† global stock market crashes of 1987, the Dotcom bubble of 2000-2, the recession of 2002-3, the housing bubble and subsequent crisis of 2006-2008. It is from many of these crises that we can observe a pattern; many periods of economic downturn could have been prevented had common sense financial policies been enacted prior to these red periods. A prime example ofRead MoreThe Financial Crisis Of 20081384 Words   |  6 PagesThe turmoil in the financial markets also known as the financial crisis of 2008 was considered the worst financial crisis since the Great Depression. Many areas of the United States suffered. The housing market plummeted and as a result of that, many evictions occurred, as well as foreclosures and unemployment. Leading up to the financial crash, most of the money that was made by investors was based on people speculating on investments like real estate, stocks, debt buying, and complex investmentRead MoreThe Financial Crisis Of 2007 And 20091594 Words   |  7 PagesPrior to the crisis in 1907, individual banks such as JP Morgan and the reserve banks of New York were considered full service financial institutions. In the year 1913, the Federal Reserve System was created by congress to help stabilize the financial market by acting as the lender of last resort to the banking institutions (federalreserve .gov). Nonetheless the great depression still hit the economy between 1929 and 1933 which led to the stock market crash and market share value decrease by 80% (historyRead MoreThe Term Global Financial Crisis (Gfc) Refers To The Financial1745 Words   |  7 PagesThe term Global Financial Crisis (GFC) refers to the financial crisis of 2008-2009 that, according to leading economists, is the worst financial crisis since the Great Depression (Eigner, 2015). The crisis began in 2007 due to a mortgage market failure in the United States and in the following year, with the collapse of the Lehman Brothers investment bank, advanced into an international banking crisis, which then developed into a global economic crisis, The Great Recession (Williams, 2010). ThisRead MoreThe Effects of Deregulation on Global Economy1646 Words   |  7 PagesIntroduction Thesis: Deregulation has more negative effects on global economy than positive. Deregulation, this word is heard on the news, economists use this word quite often, and government officials are somewhat terrified of this word. What does deregulation mean? Deregulation is the process in which a government may remove or reduce certain restrictions in matters of business to have a more efficient operation of markets. By observing the effects that deregulation can cause on an economy, canRead MoreFinancial Crisis And Its Effects On The Economy Essay1593 Words   |  7 PagesMillions of jobs and careers lost, $20 trillion down the drain, our once stable economic becomes one that is taken over by systemic corruption; the livelihood of people worldwide is now in the hands of five investment banks, two financial conglomerates, three insurance companies, and three rating agencies. Furthermore, all of these companies are working hand-and-hand, as a team, whose main goal is to increase their personal bank accounts, which are located in banks overseas, at the risk of theirRead MoreMain Trends of Wholesale Banking1615 Words   |  7 PagesIdentify and critically appraise the main trends that have taken place in corporate and wholesale banking ov er the past twenty years or so. In your answer make a critical appraisal of the effect these trends have had on the nature and structure of the industry The recent two decades witnessed the great change in the financial world. In the past, the banks might are limited with the ability of exchange foreign currency, but nowadays, it is available to exchange foreign currency at any time in mostRead MoreThe Global Financial Crisis 0f 20081181 Words   |  5 Pages The Global Financial Crisis of 2008-2008: The Role of Greed, Fear, and Oligarchs The global financial crisis of 2008-2009 is considered to be worst financial crisis since the Great Depression of the 1930s. Large financial institutions collapsed, banks received bailouts by the government, and stock markets plummeted as well. In result, people were being denied loans. The housing market became a problem because of financial issues and many people were unable to continue to pay their mortgagesRead MoreNeoliberalism Essay1723 Words   |  7 Pagesregulatory agencies to be taken over by special interests and anti-government groups which reduces the level of protection for the general public. Deregulation is the â€Å"the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry†. (investopedia, 2013). From a neoliberal supporter’s standpoint, deregulation allows corporations to increase their bottom line and profit margins by reducing regulations that may restrict them from