Topic 6 †Bailouts And Buyouts. I Would Like To Start With

Topic 6 – Bailouts and Buyouts I would like to start with a very famous quote greatly discussed in class and the book Bailout Nation. The quote by economist Allen Meltzer that noted – â€Å"Capitalism without failure is like religion without sin – it just doesn’t work† (Ritholtz, 4). In the past, companies like WorldCom and Enron where corruption, recklessness and high risk decisions have led investors, government, and the market overall to take a charge on them. They all lost their capital, reputation, and even few lost everything and ended up in jail. Why all this recklessness and moral hazard created by high executives? Who pays all of this at the end? The companies themselves or the taxpayers (citizens) themselves? If sin did not exist,†¦show more content†¦Short sellers identified most scams, in which the SEC should encourage with financial incentives rather than penalizing them. (5) The Federal Reserve was stated to be amassing more, not less, authority (Ritholtz, xxvi). Central banks should focus on setting monetary policy and regulation should be handled by a different regulator than the Fed. (6) Bank regulators should be replaced by a single regulator. As the FDIC made a wonderful job managing the 2008 crisis, and to stop regulator shopping the FDIC should oversee bank regulation. (7) The repeal of Glass-Steagall Act contributed to the crisis, so is only normal to restore it. The banking system should be divided in two halves; speculative and underwriting, and commercial taxpayer-backed depository banks (Ritholtz, xxvi). (8) As Nixon Treasury Secretary George Shultz famously quoted, â€Å"If they are too big to fail, make them smaller† (Ritholtz, xxvi). By reducing the limit size of the behemoths of total U.S deposits, competition would increase leading the banking sector with more institutions decreasing bailouts. (9) In corporate structure, public firms along partnerships should be held responsible a nd liable for the losses. This will prevent partnerships, just like public firms to not act recklessly with their investor’s money. (10) Regulate nonbank lenders, along with depositary banks. Nonbank lenders created most subprime loans, causing almost 400 of these institutions to fill for bankruptcy.Show MoreRelatedGovernment Intervention Paper: Lehman Brothers5371 Words   |  22 Pagesthe Lehman Brothers case that changed how it managed the AIG situation? What would potentially have happened if the Federal government had not intervened in the AIG situation? What is the role of government in inspiring and maintaining confidence in the market? This examination of employs past, recent, and current scholarly research and media literature to support the history of financial crisis of 2007-2009. 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