Following the financial crisis of 2008, the United States government decided to take legislative action in order to protect the American public and tighten the leash on the financial sector. From unregulated derivatives markets to excessively risky trading and speculative losses written off under the cover of a portfolio hedge, the tools and investment vehicles utilized by the finance industry generated enormous amounts of revenue, however as the crisis showed, even financial powerhouses are susceptible to failure. Bailing out the finance industry with billions of dollars provided a quick fix for keeping major firms afloat with the taxpayer money, but it was clear that real change was necessary. Continue reading
The 2008 financial crisis left many people with no homes, jobs, or way of life. It affected the economy more significantly than any crisis since the Great Depression. Dodd-Frank was created in response to this catastrophe to assure that it would never happen again. The law imposes regulation in nearly every aspect of the financial industry, covering investment and commercial banks, insurance companies, rating agencies, hedge funds, and many others. With the implementation of Dodd-Frank, we must consider the costs and benefits of such a bill. If there is too much regulation on banks, for example, they will be less likely to lend, decreasing liquidity in our economy and leading to a lack of economic growth or even a recession. Continue reading
Following the financial crisis of 2008, the financial industry suffered backlash from the public following a historic and infamous series of events that threatened America’s economy. From media pundits to organized efforts such as the “Occupy: Wall Street” movement, there has been a continual protest against the ‘injustice’ and corruption of greed that supposedly plagues large financial institutions. However, many Americans rely on financial services for retirement savings, investment opportunities, the ability to get a mortgage and more. Despite the complexity of many financial systems, which may be simply understood by the general public, the causes of the crisis held blame with those behind-the-scenes, and an ethical analysis can bring these actors and their decisions to light and provide a clear picture of what was done wrong and why. Looking into AIG, a major player in the financial crisis, a history of ethically questionable management can be seen, with blatantly unethical choices leading underlying collapse of the financial system in 2008.
After watching “Too Big to Fail,” it is clear that the financial crisis in 2008 further exacerbated the problem of “too big to fail.” The fact that “10 banks now hold 77% of all US bank assets” is proof of this (TBF). Clearly we didn’t learn from our mistakes…the size and span of these banks is what caused such destruction. Rather than learn from this, we made these banks even bigger. It is clear, however, that the government had little time to come up with a solution. A solution that, if not effective or executed fast enough, could have ruined the economy. Bernanke emphasizes this when they are trying to get the stimulus package passed: “If we don’t do this now…we won’t have an economy on Monday.” Continue reading