Question

In: Economics

Should we just let the “too big to fail” banks just fail, and allow them to...

Should we just let the “too big to fail” banks just fail, and allow them to learn from their mistakes regarding the great depression? If you were President Obama could you HAVE or HAVE NOT signed the Stimulus Package into law? Why? Why not?

Solutions

Expert Solution

There is no historical correlation kr empirical evidence that banks so called as too big to fail have not failed, as history repeats and banks who fail to comply norms an dprotocols eventually fail miserably causing huge economic losses and financial imbalance in economy causing credit crunch and recessionary curve in short run.

These banks have to be monitored and evaluated as per SEC regulation as well as various risk management frameworks and ethical corporate governance standards. To mitigate risks and uncertainty in VUCA environment.

Signing stimulus package as President was must as dose of injection of liquidity was must to revive recession of such intensity where credit line was frozen, assets were manipulated, people were left with unemployment, rolling money was no more circulated and hence the need to stimulate was must which acted as catalyst in providing consumption kick and uptick in aggregate demand which helped economy revive from deflation and stagnant GDP growth.


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