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2008 Financial System Essay

824 Words4 Pages

The article talks about the financial system as of now, and how it has changed after the 2008. This is in particular about the banks, the tightening state of credit for consumers in general. The author argues that this was inevitable and rather required, given the fragile state of the financial system today. The macroeconomic indicators also pointing to a situation which is further putting pressure on the banking system, along with the tightening government regulations related to mortgages. Relationship to Course The course on cash management tells us the importance of cash for a company. Though profits are considered an important indicator of success for a firm, there are many who now realize that cash is even more fundamental to the firm’s …show more content…

The banks have been facing a difficult macroeconomic condition, with flatter yield curves and lower lending rates, the banks need a drastic step in order to survive the recent crash. The first response to the financial meltdown of 2008 was the introduction of the Dodd Frank Act, 2010. The government responded by introducing some significant changes to the financial regulation in the United States, so as to add more accountability and improve transparency in the US financial system. The act wanted to bring the myth of "too big to fail" to an end so as to protect the American taxpayer’s money being squandered away in bailouts. The article discusses the changes introduced in the mortgage issuance pattern of the banks, which though superficially seemed to be very basic, but actually resulted in making the process making more complicated and expensive. These regulations, issued by the Consumer Financial Protection Bureau (CFPB), included the changes which were aimed to curb some of the previously held loose practices, which had triggered the meltdown in the real-estate market. In accordance with these new regulations, the lenders were given more encouragement to underwrite only what they classified as the “qualified mortgages” which were defined on the basis of the tougher standards lay down after the crisis. For those who were unable to meet the standards or default during the mortgage period, they could be

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