Financial system

Where Does Power Reside in our Government? Elizabeth Warren Interview on Financial Regulation

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• published: 08 Jul 2016
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The Banking Lobby refers to the act of representatives from various firms and organizations seeking favorable terms from the government for big banks and other financial service companies through lobbying and advocacy groups. The banking lobby opposes stricter government regulation, specifically in the wake of the recession partly caused by banking mismanagement. They state that the economy as a whole depends on their performance, and as such they believe they need favorable terms to perform at their best to maximize the economy's performance. Some are concerned, however, that they may seek terms that do not necessarily increase performance of the economy as a whole, but only benefit the large banks. The finance, real estate, and insurance industries reportedly spent a collective $6.8 Billion from 1998 through 2011, far more than any other lobbying sector.[1] Since the banking industry holds large cash reserves, they have available funds to provide their lobbying representatives to influence policymakers in Washington. Some are concerned that this may lead to new policy being heavily favored in the banks' favor. The Financial Services Roundtable is the most noted organization involved in bank lobbying with member from the 100 largest banks and financial firms. The groups mission is to "protect and promote the economic vitality and integrity of its members and the United States financial system." The current CEO of the Financial Services Roundtable, Tim Pawlenty, is a well-connected politician who had plans to run in the most recent presidential campaign. http://en.wikipedia.org/wiki/Banking_... Many factors directly and indirectly caused the ongoing Great Recession (which started with the US subprime mortgage crisis), with experts placing different weights upon particular causes. The crisis resulted from a combination of complex factors, including easy credit conditions during the 2002--2008 period that encouraged high-risk lending and borrowing practices; international trade imbalances; real-estate bubbles that have since burst; fiscal policy choices related to government revenues and expenses; and approaches used by nations to bail out troubled banking industries and private bondholders, assuming private debt burdens or socializing losses. [1][2] One narrative describing the causes of the crisis begins with the significant increase in savings available for investment during the 2000--2007 period when the global pool of fixed-income securities increased from approximately $36 trillion in 2000 to $80 trillion by 2007. This "Giant Pool of Money" increased as savings from high-growth developing nations entered global capital markets. Investors searching for higher yields than those offered by U.S. Treasury bonds sought alternatives globally.[3] The temptation offered by such readily available savings overwhelmed the policy and regulatory control mechanisms in country after country, as lenders and borrowers put these savings to use, generating bubble after bubble across the globe. While these bubbles have burst, causing asset prices (e.g., housing and commercial property) to decline, the liabilities owed to global investors remain at full price, generating questions regarding the solvency of consumers, governments and banking systems.[2] Struggling banks in the U.S. and Europe cut back lending causing a credit crunch. Consumers and some governments were no longer able to borrow and spend at pre-crisis levels. Businesses also cut back their investments as demand faltered and reduced their workforces. Higher unemployment due to the recession made it more difficult for consumers and countries to honor their obligations. This caused financial institution losses to surge, deepening the credit crunch, thereby creating an adverse feedback loop.[4] The U.S. Financial Crisis Inquiry Commission reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve's failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels." http://en.wikipedia.org/wiki/Causes_o...