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One of the more politically related causes of the 2008 Financial Crisis is deregulation, most significantly since the 1980s when politicians such as Thatcher and Reagan began to implement neo-liberal economic policies. This was a significant political change and it led the economies of the Western world, particularly the USA and the UK becoming more reliant and therefore more accommodative to the financial services industry. The result of this was further deregulation and the consolidation of the industry into a number of ginormous financial services firms that had the ability to compete in products previously only sold by specialist firms. As I will discuss, deregulation had detrimental effects on the resilience of the industry when credit froze up after crisis as seen in 2008. It is arguable whether the retention of regulation would have mitigated the crisis, but as I will outline it seems likely that deregulation had the effect of By the mid-1990s, the parallel banking system was booming, with some of the largest commercial banks appeared increasingly like the large investment banks and all of them were becoming larger, more complex, and more active in securitization. Many argued bigger would be safer and more diversified, innovative, efficient, and better able to serve the needs of firms and the consumer. As they grew, the large banks pressed regulators, and policy makers to remove many of the barriers to growth and competition, seen most obviously and importantly in the US. In 1994 Congress authorised nationwide banking with the Riegle-Neal Interstate Banking and Branching Efficiency Act. This let bank holding companies acquire banks in every state, and removed most restrictions on opening branches in more than one state. ... ... middle of paper ... ...al but it is vital to understand the importance of some of these firms to the US economy. As you will notice I have highlighted many of the firms that received financial assistance form the US government. This is a hotly contested political issue as to whether the banks deserved to be bailed out, but leaving politics aside the figures highlight how devastating a bankruptcy of any one of these firms would have been to the wider economy. Since the 1980s deregulation had ensured that the financial industry was unlike any other sector. A bankruptcy in retail may cause job losses which are regrettable but the failure of a US bank would have had devastating consequences on US and global businesses, you need only look at the trouble faced by General Motors, a huge stable US firm, to understand the impact a credit crisis in corporate finance can have ion millions of people.

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