US Financial Crisis: Prospects and Perils of Need for New Regulations



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Code : ECC0034

Year :
2009

Industry : Banking, Insurance and Financial Services

Region : Global

Teaching Note: Available

Structured Assignment : Available

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Deregulation and the Evolution of the Current Financial System The world financial system has changed since the beginning of the floating currency regime in early 1970, putting an end to the Bretton Woods system of fixed exchange rates. Under Bretton Woods' system, fixed exchange rate regime based on gold standards was followed and US dollar, backed by its economic strength, emerged as global currency with the committed exchange rate of $35 per ounce of gold.1 And all other currencies were converted to dollar depending on their respective gold conversion rate.

The Supervisory Mechanisms is that Enough? The US financial regulation system is broadly divided among different agencies. The Fed has the responsibility to regulate the US monetary system promoting stable prices and economic growth. It also monitors the operations of the holding companies including banks and other financial institutions. The Fed exercises its regulatory oversight with the Board of Governors who guides the monetary policy along with the Federal Open Markets Committee (FOMC) and regional reserve banks...

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Way Forward: New Mechanisms and the New Impediments Ross Levine, economist at Brown University, presented different perspective of economic growth of 1990s.According to him, the countries with highly liquid stock market and more privately-owned banks grew faster. The growth is boosted by efficient capital allocation and improving productivity rather than deregulatedmarkets.


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