Question

1. financial reform: Too Big to Fail
2. 2) Outline the main issues for this challenge. Briefly describe why this challenge so important for financial reform
3. Offer your reflections on this challenge. These reflections need not be developed with argument and evidence. Just explain what you think, what questions you have, or reflect on what you have learned. Or, if you have an argument, please advance it, and do your best to articulate your evidence.

Answer 1

“Too big to fail” emerged in the 2007-08 global financial crises that faced the banks; some banks were likely to collapse if the risk management was not effectively addressed. The term also meant that financial institutions and corporations were interconnected because their collapse would adversely decline. Stewart McKinney popularized the term during his congressional hearing in 1984 (Molyneux & Philip, 71). The challenge was essential in ensuring attentiveness to curb the risk of financial institutions collapsing.  The risk paved the way for the formulation and implementation of policies that provided banks to ensure customers' deposits; this granted them confidence that money deposited in banks was safe. Additionally, the 21^st century exhibited challenges inconceivable in the past centuries hence advanced and secure banking systems.

I learned a lot from the interesting topic; the depository banks developed advanced strategies to invest their finances in protecting customer interests. The banks are expected to invest in low risky projects to avoid getting at a loss. I found it hard for the depository banks to run their functions since they rely on the clients' deposited finances; however, the customers, in some instances, end up withdrawing the finances in a short while, denying the banks investment capital. The investments are advantaged compared to depository banks; they obtain funds from the complex investors; hence risky investment opportunities with their funds (Carr & Alexandria). Investment banks are also referred to as the shadow banking system developed to revive depository banks in 2007. The government played significant role in reviving the collapsing banks by offering bailout finances via the Troubled Asset Relief Program's adoption in 2008.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“Too big to fail” emerged in the 2007-08 global financial crises that faced the banks; some banks were likely to collapse if the risk management was not effectively addressed.