The global financial crisis had its origins in the United States with the mortgage crisis in 2008. Investment bankers, insurance companies, mortgage lenders were the major players in this game. Severe financial problems led to a freeze of credit markets and resulted in global financial crisis. Primarily I am going to indicate the main factors that played role in the global financial crisis. After that I am going to concentrate on the financial meltdown in Iceland. Finally, I am going to discuss the similarities and differences of Icelandic crisis and global financial crisis. The main causes behind the global financial crisis were deregulations of banking sector and ‘’If it is not illegal, it is fair’’ mentality. High-ranking executives who ran the most powerful financial corporations used financial markets as their playgrounds. There was a circle of collude between the financial institutions. As they were betting on riskier assets, their revenues and executive bonuses were skyrocketed. Subprime mortgages were the breaking point of the crisis. The reserve requirements for mortgages were % 2.5. This means that if more than % 2.5 of the loans goes default, taxpayers have to bailout the companies. Mortgage backed securities were the breaking point of the global financial crisis. Federal Reserve Bank lowered interest rates to % 1 so banks from all over the world started borrowing cheap credit. Banks increased their leverage. In mortgage market, investment bankers combined thousands of subprime mortgages and started selling them as Collateralized debt obligations (CDO) to the investors. These CDOs were the baskets of subprime mortgages that ranged in various risks. CDOs were rated high by rating agencies so that they can be insured. ... ... middle of paper ... ... the world and dragged the whole world economy in recession. Iceland didn’t have the financial derivatives like mortgage backed securities or collateralized debt obligations but borrowed 10 times more than its GDP and took lots of risk when lending those funds. Lehman Brother’s collapse on September 15 played critical role because it stopped interbank lending all around the world. As a result Iceland economy collapsed. These events should be a good lesson for financial markets and governments for the future. Deregulations are necessary for the expansion of the economies in this globalized world. However if they are not well calculated, economic collapses likely to occur. In order to prevent these kind of catastrophic events, governments and regulators must work for the long term well being of the economy. Not the short-term gains of companies and their executives.
that period the electric utilities went from being highly regulated to being deregulated following the trend in successful deregulation of many industries such as airline and telecommunication industries. The concept that deregulation will bring more competitive prices and better services to the public, undermined the negative potentials of the free market system. Deregulation bill must be abolished because it brings higher electricity prices, lower reliabilities of electricity, and also it threatens
Deregulation of the Airline Industry The airline industry has been subject of intense price competition since it was deregulated, and the result has been a number of new carriers which specialize in regional service and no-frills operations. These carriers typically purchase older aircraft and often operate outside the industry-wide computerized reservations system. In exchange for these inconveniences, passengers receive low fares relative to the industry as a whole. This research examines two
On October 24, 1978, President Carter signed into law the Airline Deregulation Act. The purpose of the law was to effectively get the federal government out of the airline business. By allowing the airlines to compete for their customers' travel dollars, was the thinking, that fares would drop and an increased number of routes would spring up. Expected Results The results of airline deregulation speak for themselves. Since the government got out of the airline business, not only has there been
Introduction Thesis: Deregulation has more negative effects on global economy than positive. Deregulation, this word is heard on the news, economists use this word quite often, and government officials are somewhat terrified of this word. What does deregulation mean? Deregulation is the process in which a government may remove or reduce certain restrictions in matters of business to have a more efficient operation of markets. By observing the effects that deregulation can cause on an economy
personal experience, we get much of what we know from the (radio). There must not be a deregulation; it would be detrimental to us all. Toomey’s argument is that radio is a community resource that is being misused, and she is a making a call to action for people to get involved with restoring that resource. According to Billboard Bulletins, one of the most important arguments presented by those opposing the deregulation, a letter signed by 30 major recording artists was sent to Michael Powell, chairman
crisis in our country. Several other states have been on the brink of disaster, but have managed to pull themselves out with minor injuries. How is the problem in California different than in other states? The deregulation of the state’s utilities is the answer. Upon signing the deregulation policies, California allowed for wholesale electricity and put a freeze on retail rates. (The Economist, 2001) In an article titled, “A state of gloom”, a publication called “The Economist” states that this “Catastrophe
Would this merger really add value to Boeing or would the costs outweigh the benefits gained. The Aerospace Industry Commercial Aircraft The commercial aircraft industry had experienced a significant change during the deregulation of domestic airlines in 1978. The deregulation resulted in an increase in air travel, intense airfare competition among carriers, the entry of low-cost and low-capacity airlines. This increased competition shifted the focus of aircraft manufacturing from performance
be vital to efficiency effects. "Liberalisation and deregulation should be possible in order to have an efficient private sector and the cause for this is due to the initially nationalised enterprises are frequently monopolies," (Affuso, 2009, p. 222). So one can assume that some nationally governed monopolies were privatised and turned into private monopolies such as water, gas, utilities and railways. Furthermore, the prospect of deregulation and liberalization can possibly continue independent
television station in the same city (AFL-CIO 2004). This deregulation has led to a frenzied wave of mergers – most notably the Viacom/CBS merger in 1999, the largest in history (Croteau & Hoynes 2001: 21). Ownership of the media has rapidly consolidated into fewer and fewer hands as companies have moved to gobble up newspapers, television stations, and radio stations across the country. Perhaps no other company has benefited more from this deregulation than the company which is the focus of this essay
I this paper I am going to compare impacts of liberalization between two countries: Poland and Argentina. Let me first start with Argentina will compare the background, policies and consequences of both the countries. In Poland we say “Don’t praise the day before sunset.” By the early twentieth century Argentina was seventh wealthiest country. According to Jurnal of Latin America Studies “At this time, when the nation boasted one of the highest rates of growth of per capita income, no-one would have
PRIVATISATION - TELSTRA What are the advantages of privatising Telstra and how does this impact it's ethical conduct while striving to satisfy community expectations? I believe that putting important public assets into select private hands is not in Australia's long-term interests, and oppose the partial/full sale of Telstra for the reasons that the Government has given. The argument the Government has given for the privatisation and corporatisation of Telstra has been a budget conscious one where
Airports are key enhancers of commerce and trade; they generate massive transportation and key economic benefits (Vasigh, 2007). Privatization of airports relates to transfer of ownership of airport from public ownership sector to private ownership (Jobs Consultancy, 2007). Privatization process aims at increasing of efficiency, competitiveness and viable financing of airports. Considerations on whether to privatize an airport are made by governments and the decision has a long-term impact that follows
Deregulation is the reduction or complete elimination of government power in a particular industry, specifically the financial sector in this case. It is usually enacted to create more competition within the industry; however, it also allows businesses and companies to make riskier moves. This “however” is the main reason why deregulation can be considered one of the leading causes of the recession. In the documentary, Ferguson references one of the first acts of deregulation that had
given to the airlines were funded by the American tax dollar. To solve the rather large amount of disgruntlement, the United States Government enacted the Airline Deregulation in 1978, and it wreaked havoc upon the airline industry and all of its participants, Northwest Airlines included. The airline was doing rather well until the deregulation where each airline became a part of a cut throat world, giving all the participants rather two rough options, which if were not followed created a certain doom
given a weapon to defend themselves against enemies. America was outraged and the FCC began to receive pressure from both parents' rights groups and Congress to re-examine the 1984 policy of deregulation of children's television. Congress finally identified the ineffectiveness of the market theory of deregulation espoused by the Reagan administration because there were more commercials on television than ever before, broadcasters aired anything that would make a profit, violent television shows erupted