Failure of Three Regulation in Financial Crisis

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Since the year 2008, many countries had been suffered from a financial crisis or Hamburger crisis, because of the mistaken policy, complex financial system etc. which cause a severe shock to the financial system globally. From this impact, the federal government of United State of America (USA) and other countries had injected a large fund for retrieving this situation significantly. Therefore, it can be explained that understanding the main causes of the financial issue can assist each country to clarify problems. The purpose of this essay is to elucidate regulatory failure in 3 major types: first, misguided intervention in the U.S. second, failure of financial risk management, next, the lack of transparency regulation in private and public sector, and a case study from Lehman Brothers. Firstly, an erroneous policy from the U.S government caused a long term effect to a financial system globally. Generally, the housing and financial market had been strongly promoted. The competition among financial institutions was increased as same as Gross domestic Product (GDP) in each country. To be more specific, reducing of interest rate in short time and sub-prime borrowers had been facilitated to own a home easily and that caused a sub-prime crisis. Ely shows that the US government used the financial institutions as Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) to support sub-prime borrowers or people who had lower credit. Moreover, banks had been pressed to extend loan for homebuyer with a low interest rate policy. Many flexible campaigns attract borrowers to own a house. By the supporting from Fannie Mae & Freddie Mac and the Federal Home Loan banks, opportunities had been... ... middle of paper ... ...e of TBTF could not protect Lehman from financial disaster, so in the future, this policy should be changed from Too-Big-Too-Fail to Too-Big-Too-Save. Even though, US government should lend a hand to pull Lehman from bankrupt, but the request had not been responded, because the intervention from US government may ruin a global financial mechanism. Therefore, a failure financial management in Lehman Brothers can be one of significant cases in this century. Based on the above, a conclusion can be drawn that misguided policies, lack of risk management and transparency regulation can strongly cause the global financial crisis. Therefore, increasing these three solutions can improve a financial foundation worldwide. Ultimately, a consensus needs to be reached by government, as well as community in each country to ensure that global monetary system can be implemented.

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