Two Similarities Between The Great Depression

The similarities between the two events consist of events causing them, however existing institutions when the events happened and the responses to those events were different (Elias and Jordà 1). Both in 1907 and 2008, most significant problems came out from outside of the traditional financial system. Today, many analysts believe that problems

The financial crisis from2007 to 2008 is considered the worst financial crisis since the Great Depression of the 1920s and destroyed the U.S. economy severely. It led the housing prices fell 31.8%, the unemployment rate rose a peak of 10% in the United States. Especially the subprime market, began defaulting on their mortgage. Housing industry had collapsed. This crisis was not an accident, it caused by varies of factors. The unregulated securitization system, the US government deregulation, poor monetary policies, the irresponsibility of 3 rating agencies, the massed shadow banking system and so on. From my view, the unregulated private label mortgages securitization is the main contribute factor which led the global financial crisis in 2008.

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

However, it is clear that these unethical practices served as catalyzers of the financial crisis. Even though many financial institutions that could be held responsible for the 2008 crisis no longer exist and that legislation, as the Dodd-Frank, has been passed in order to further regulate financial institutions, many of the institutions responsible for the crisis are still in the core of the economy, controlling a very big part of it. It might be impossible for the general public to fight against a possible future recession, as the power of an individual is close to insignificant in comparison to the power of an established financial

The financial crisis that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’

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:

The most prominent and possibly the most notable market crash is the ‘Global Financial Crisis’ which was a direct repercussion of the neo-liberal policies which were implemented at the time and for which many of today’s global economic problems has stem from. These policies predominately include the replacement of government functions and services with profit-seeking entities, or more commonly known as privatisation and most importantly the deregulation of the economic market (Beder, 2006). Due to the deregulation, financial institutions and other economic players were able to invest in more complex financial markets which were beyond their understanding and a result a market crash occurred and the detrimental effects were widespread. If regulation had been put in place to monitor investment activity then it has been argued that the Global Financial Crisis would not have occurred and the associated global economic problems we are experiencing today would not have eventuated (Dag Einar Thorsen, 2013). As neoliberal policies where implemented around the world casing the global financial crisis the world disparities in wealth and income increased as well as poverty, contradicting neoliberal theories that by increasing the wealth at the top everyone becomes better off.

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

It is clear that the most popular terms, which could be seen on media including the Internet, newspaper on the late of 2000s, are Global Financial Crisis (GFC), credit crunch, sub-prime crisis or bankruptcy. The financial crisis, started in the late of 2007 in the USA and quickly become international phenomenon, is seen to be the worst crisis since the Great Depression, 1929-1933 (Hull, 2012). GFC was a steel punch, which has probably destroyed the biggest and unbreakable economy in the world, the USA. It seems that the idiom “Too big to fail” may not true in all circumstances. There were some big financial institutions receiving bailout from the government and some announced go bankrupt such as 160-year-old bank and the forth-largest bank before the crisis, Lehman Bothers Bank . There were a lot of researches, books and journals discussing and debating every perspective the turmoil including causes, determinants and consequences. Further more, there were some researches of

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.

It is important to begin with the observation that the global economic crisis, which was marked by the great recession, began with problems in the management of monetary regimes at national and international levels. Angelides & Thomas (2011) opined that the global financial crisis was an effect of either action or inaction on the part of the people who were responsible for the management of the global monetary system. The

The goal of financial regulation is to increase efficiency in the market, as well as enhance the market 's ability to absorb shock caused by financial instability. There are many reasons for financial instability, but it can be narrowed down to

How have different countries responded to past financial crises and what possible learning could this provide for governments today?

These were complex crises, resulting from an interaction of shortcomings in national policy and the international financial system. Individual governments and the international community as a whole are taking steps to reduce the risk of such crises in

At the same time, the regulators should be as transparent as possible and fully accountable. The accountability and transparency of the regulator will increase the credibility of the regulator and in-turn benefit the regulated entity. Types of Financial Regulation Financial regulation in a country can be done either by a single body called a single regulator or multiple bodies co-existing and working together or in a hierarchy of entities known as multiple regulators. A regulator whether single or multiple does not determine the economic standing of a country or its financial strength. Many developed countries of the world follow either the system of single regulation or multiple regulations. Often in times of economic crisis or financial boom in the country’s economy the government of the nation will review its regulatory system and choose to expand or close down some of its regulatory bodies.