Global Financial Meltdown Essay Example | Topics and Well Written Essays - 1000 words

worldwide Financial Meltdown - Essay Example2) The downfall of Iceland In the case of Iceland, it was a entire model for a family to live till the government decided to deregulate the banks and let multinationals exploit their natural resources. The way out was a disastrous impact on the environment and the banks collapsed due to which unemployment tripled and many of the people lost their manners savings. When the largest banks were privatized, they borrowed currency totaling to 120 billion dollars which was roughly ten times the size of the economy. These banks and their activities were supported by American auditors such as KPMG and credit rating company which rewarded them highest form of grading Triple As. In the end, regulators formed the role of mere spectators and did nothing. 3) Destructive growth of United States financial sector After the majuscule Depression, the financial sector was strictly regulated most of the banks were local and were not allowed to use depos itors money for any sort of investment. But then the investment banks went public and that is when the financial sector went berserk. The investment bankers straightway were owners of huge amounts of public money. When President Reagan came into power, he with his treasury secretary who was a CEO of Merrill Lynch, began a xxx year deregulation plan. The first firms to be deregulated were savings and loans companies. These firms were deregulated which provided them with a permit to use depositors savings for big speculation purposes. They failed and many went to jail. Deregulation continued in Clintons era and by the late 1990s you could identify the major financial firms. The deregulation activity was overseen by a Harvard economic professor Larry Summers, an economist Greenspan and Robert Rubin a former CEO of investment bank Goldman Sachs. This clearly shows us how economics was exploited for individual(prenominal) gains, politics was being influenced by the financial sector and the academia corrupted. Further on, the documentary (Ferguson, Inside trading) informs us about how financial firms became so strong that they could breach a law, be exempted by it for a year and then a new law is passed to facilitate their interest. The merger between Citicorp & Travelers is a mirror image of the above statement. While the financial sector continued to become powerful, the internet bubble friction gave the economy a huge blow. We realize through the documentary that the internet bubble was pre-planned because investment banks were winding in promoting firms which they knew would surely fail. Conversations between the personnel of investment banks termed those firms as useless while they were describing them as perfect investment opportunity to the public. With deregulation taking place and the technology advancements occurring derivatives entered the economy. They were engineered in target to make more than profit, but in reality it was explosive material that would make the market highly volatile. In order to avoid any discussion over its regulation, a bill was passed in favor of de-regulation of derivatives. As the diligence was even more powerfully dominated by a few gigantic investment banks, hostage and insurance companies and credit rating agencies than before financial sector became even more complicated. 4) Complicated financial products engineered to grow profits Inside job gives