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US Financial Crisis:A Story of Smart Bankers and Laid Back Regulators?



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Code : ECC0011

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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US: Role of Regulators and Investment Bankers As of October 2008, the proposed bailout of theWall Street by the US government was a whooping $1.6 trillion3 . The tax payers, whosemoney is used to bailout the greed of the investment bankers, are confounded over the necessity and effectiveness of the bailout plan. They question why losses should be socialised, when profits are privatised. Further, they feel that if at all the government should intervene; itmust anticipate and try to avert the crisis by taking appropriatemeasures, thus ascertaining the role of regulators in a country's economy.

In the US, regulation in the financial services industry does exist but is highly complicated. There aremany federal and state agencies, which are involved in the system. Though these agencies have different agendas,many a time, a particular financial services firmis accountable to one ormore of the agencies...

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Wrestle between Bankers and Regulators Prior to the financial crisis, the investment bankerswere always considered to be a very smart lot and they were looked at in awe. In doing varied financial activities theyworked hard and at the same time took high risks. Resultantly, the returns were also very high as the profession itself was very rewarding. However, the investment bankers were also looked at scornfully for the amount ofwealth theywere able to amass.

The investment bankers were able to garner wealth as the financial industry was prospering in the US and the investment banks were becoming larger.With fast development of investment banks, their activities started becoming very complex. For instance, as themortgage loans became easier for the homebuyers, there was a surge in demand for home loans. Resultantly, the loans became less affordable...


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