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28 Jan 2018

Discuss how deregulation of financial markets and low interest rates contributed to creating the financial crisis.

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The Savings and Loan crisis of the late 1980s is discussed in the book â a bit. The Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and the Garn-St. Germain Depository Institutions Act of 1982 (GSGDIA) contributed to the crisis. How? The Financial Institutions Reform, Recovery, & Enforcement Act of 1989 (FIRREA) was passed in response to the crisis. What effect did FIRREA have on the prior regulations? Are there any similarities between the S&L crisis and the latest financial crisis?

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essay questions from the list.

A. The âSupply and Demandâ analysis for bonds offers a theory for how interest rates are determined.

1. List the Demand factors that affect interest rates.

2. List the Supply factors that affect interest rates.

3. Which factors do you believe are most important in determining interest rates?

B. Issuing bonds are an important mechanism for attracting capital into the financial markets.

1. What is the importance of Credit-Rating Agencies?

2. List at least two (2) credit-rating agencies in the US.

3. Explain how they affect the efficiency of Capital Markets.

C. Junk bonds are common in the secondary market.

1. Explain what is a âJunkâ bond.

2. If they are NOT âInvestmentâ grade, then why are they popular with investors?

3. Discuss an example of a âJunkâ bond that would be a very profitable investment.

D. It is hard to avoid âconflicts of interestâ in financial markets.

1. Why is it so important to identify a conflict of interest?

2. Discuss a specific finance example.

3. Explain how financial markets operate to minimize âconflicts of interest.â

E. Financial Engineering has been blamed as an important cause of the 2008 Financial Crisis.

1. Explain the advantages of âFinancial Engineering.â

2. Explain the disadvantages of âFinancial Engineering.â

3. Provide an example of âFinancial Engineering.â Who benefited the most from this financial innov

A. Trillions of dollars in asset value disappeared after the peak of the 2006 Asset Bubble.

1. What factors do you think were most important in the 2008 Financial Meltdown?

2. How did they impact the confidence in the financial markets?

3. What policies do you think are most important in preventing a future financial crisis? Explain.

B. Financial Innovation and Liberalization contributed to the Global Financial Crisis.

1. Explain how specific examples of âFinancial Innovationâ negatively impacted financial markets during this period.

2. Explain how specific examples of âFinancial Liberalizationâ negatively impacted financial markets during this period.

3. How did consumer lending and bank supervisory regulation contribute to the Financial Crisis? Could it Happen Again? Explain.

Discuss how Dell can operate with such a historically low current ratio, why it does so and what safeguards you would have as a financial manager to prevent this from becoming a crisis. Cite your sources in parenthesis for others.

Comment on:

How does Dell operate with such a low current ratio?

Why does Dell operate with such a low current ratio?

What safeguards would a financial manager have to prevent a crisis?