Shadow Banks and The Great Recession

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In last week’s post I looked at current financial reform and regulation, and why these are necessary to fix the economic situation in America.  I had looked into what this new regulation would entail and a lot of it was about regulating shadow banks.  According to the Paul Krugman column Financial Reform 101 there had been a lot of regulation of standard banks in the post-World War II period, which is why there had been such a long period of stability.  Unfortunately the regulations did not apply to “shadow banks,” institutions that carried out banking functions, but weren’t banks.  These shadow banks were able to operate without being controlled by the same regulations which standard banks were.  This enabled the shadow banks to make a lot of money really quickly, but at the same time left them very vulnerable to any risks, such as the mortgage crisis.  I want to look into the emergence of these shadow banks and the effect they had on the economic crisis.

In order to look into these shadow banks I want to look into the recent history of companies such as Lehman Brothers and Merrill Lynch.  I want to research the ways they operated and what risks they took that were dangerous.  I already know that Merrill Lynch worked closely with Enron, an obvious risk to begin with.  I want to look into court testimonies, interviews and investigations to determine what risks these companies took and how they lead to the financial crisis.  I think that these organizations operated in an open system.  I want to look into the ways that these organizations affected their environment and the ways in which their regulation-free environment affected them.  The actions of these organizations sent the economy into one of the worst recessions since the Great Depression and required the government to spend billions of dollars in order to keep the economy from collapsing. The environment also had an effect on the ways in which these organizations operated.  Because there were no existing regulations there was nothing to keep them from taking the risks they did.  I want to investigate the specific actions taken by Merrill Lynch and Lehman brothers and the ways they possibly affected the environment as well as the effect that any regulation or lack thereof had on their actions.  As I said I plan to look into testimony from things such as the Congressional Oversight Panel, and newspaper articles throughout the past decade about the operations of these companies.  I also want to look for scholarly articles regarding the lack of regulation, or Lehman Brothers or Merrill Lynch.


Deregulation and New Financial Legislation Set the Stage for the Financial Crisis

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For my previous two posts, I focused on the financial reform and regulatory legislation and securitization’s impact in the Enron crisis.  Doing research for both of these posts introduced me to the controversial topic of financial regulation and deregulation.  For my final paper I’m focusing on the financial regulation and deregulation that influenced behavior and was responsible for the financial crisis that’s led us into the Great Recession.  There are many questions that need to be addressed for this topic.  Why and who desired the new regulations and the deregulation of the financial markets in the US?  How was this legislation needed or not needed?  What were the pros and cons of some of the pieces of legislation?  Where did the regulatory system fail and why?  Researching these questions will paint a clearer picture of what set the ground work for the financial crisis. Continue reading

How to Reform? The Big Question

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In wake of the financial crisis the public is demanding more regulation on the banks and other financial institutions that have put the country’s economy where it is.  These regulations range from total transparency with derivatives, breaking up of the “Too Big To Fails” (TBTF), and other restrictions on financial institutions.  Anyone can easily see that this is a complex topic, now throw politics into the mix.  On the Baseline Scenario many author and financial reform bloggers have discussed this topic and its issues. Continue reading

A Look at Steroids in Baseball Today

In May 2007, a student wrote a blog post about steroids in baseball.  The post brings up many excellent ideas and addresses a topic that has only generated more interest since then.  I found it particularly exciting to read a student’s take from almost three years ago on a topic that is currently receiving widespread media attention, particularly in the wake of Mark McGwire’s admission to steroid use.   The author of the post does an excellent job of portraying an issue that had and continues to have major implications for the Major League Baseball organization.  The individual addresses the nature of the effects, the impacts the situation is having on the entire organization, how the problem arose, and touches on the effect that the widespread steroid use will have on the future of the organization and the image that the MLB will have. Continue reading