सुधार

IV.

The problems of regulation Instinctively, we immediately think that there was a lack of financial regulations which failed to monitor the excesses of financial actors.

Indeed, as we have seen, they developed very complex financial tools but they forgot all the risks as all that they wanted was to make profits at any cost.

We can prove the reduction of regulation in the US with the example of the promulgation of the act in 1999 that repealed a former law from 1933 (so during the Great Recession) which separated commercial and investment banking.

Lots of experts agree that this repeal was a mistake because this authorized a too big competition between both types of banks pushing them to take important risks.

Antoher lack of regulation is to be explained which is the developpement of financial innovations eased by new technologies and regulation wasn't able to keep track.

So there wasn't a specific regulation on new tools, they weren't really monitored.

(For example, the CDS credit default swap) So, we could conclude that the 2008 crisis is all about a lack of regulation.

However, the problem is that when we dig a little deeper, we realised that the problem wasn't just a lack of regulation, but that the regulations in place were the wrong ones.

Indeed, the regulation could also be at the origin of the crisis.

For example, loans to lower income households were encouraged by the american government as well as redemptions of mortgages (credits?

Loans?) such as subprimes.

All of this was to encouraged the access to property of households.

Interest rate policies are also incriminated as they were maintained to a low rate for long periods.

And the Federal Reserve has also a role in the crisis because they did not react to stop the growth of the speculative bubble.