Share via Email Sir Mervyn King: This is what he said, in his BBC Today programme lecture last week, that he and his colleagues should have been doing before the financial crisis. The thought of the gently spoken Sir Mervyn King bellowing from the roof of the Bank, possibly with a megaphone — do we still manufacture them, I wonder? King went some way to admitting culpability, and even contrition, in conceding that the fashionable view — that controlling inflation was enough to secure stability — was misguided.
This includes a lot of people who should know better, including New York Times columnist Paul Krugman. As they put it on their website: Now he says the artificial stimulus to housing had to do with crooked Wall Street shenanigans, and had nothing to do with the Fed or government policy at all.
At the heart of the crisis, we find government policies that both expanded the number of loans made and mitigated the risk of extending credit to shaky borrowers.
Woods summed it up this way: It turns out a lot of loans became non-performing loans. So, a lot of loans turned sour. So it was the making of bad loans.
It was not that banks were engaged in all kinds of new-fangled activities that so-called deregulation allowed them to do.
No, it was in their traditional activities — the extension of loans — they did a really bad job.
They go on to expose the role of Freddie and Fannie in the whole scenario, explaining how these quasi-government-private institutions took on the risk of making bad loans, leaving banks with only the upside.
Finally, Woods nails the biggest factor in the whole mess: We would place emphasis, of course, on the activity of the Federal Reserve, and then supplement that with government policy, because government policy was making housing an artificially attractive outlet for your money.
The solution to the problem was essentially more of the problem — expansionary monetary policy inflating bubbles. Interested in learning more about physical gold and silver?Jan 22, · Financial markets are guessing wildly about the prospects of banks, insurers and other financial corporations, and the plunging value of stocks poses immediate dangers to .
The Financial Crisis: How Deregulation Led to the Crisis Abstract Laws should therefore be aimed at regulating banks to ensure the stability of the financial system. Document Type Thesis policymakers,!and!the!people!in!the!country!about!what!caused!the!!Financial!
Central to any claim that deregulation caused the crisis is the Gramm-Leach-Bliley Act. The core of Gramm-Leach-Bliley is a repeal of the New Deal-era Glass-Steagall Act’s prohibition on the. Demolishing the “Deregulation Caused the Financial Crisis” Myth December 30, by SchiffGold 9 2 Hindsight is supposed to be , but for some people it seems like it’s blind.
In the s and 70s, strict capital reserve and liquidity ratios were applied to banks, and there was a panoply of sensible rules limiting the taking-on of excessive risks in mortgage lending.
Central to any claim that deregulation caused the crisis is the Gramm-Leach-Bliley Act. The core of Gramm-Leach-Bliley is a repeal of the New Deal-era Glass-Steagall Act’s prohibition on the.