Question

In: Finance

The 2008 financial crisis. Focusing on the book Too Big to Fail. Support one of the...

The 2008 financial crisis. Focusing on the book Too Big to Fail.

Support one of the following sides: John Allison’s power of capitalism and minimum government regulation or Barak Obama the need for strong government regulations. Detail and support your stance.

Solutions

Expert Solution

The 2008 financial crisis was because of the housing bubble where banks were bundling and selling junk mortgage and the credit rating agencies gave such mortgages a fantastic rating. During this, the big bank like Lehman brothers who were too big to fail was in trouble and failed. This was because of capitalism and minimum government regulation.

If there was a strong government regulation on the functioning of financial markets this bubble would have been avoided but there is also disadvantage of the strong government regulations, due to the strong government regulations free trade won't happen this will result in an inefficient market working. The market should be free in its working and should be efficient so that the trade can flourish and countries can become prosperous. 2008 like situation is a market cycle. The market is always cyclic sometimes it is overvalued sometimes it is undervalued it's the very nature of the market we should not bound it by imposing the regulations.

If one has noticed after the pain of 2008 in a couple of years market flourished again so it is the cycle. So I support John Allison's power of capitalism and minimum government.


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