The Wall Street Is An Useful Tool For The American Economy

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is commonly referred as the Dodd-Frank Act. This act was passed as a response to the Great Recession in order to prevent potential financial debacle in the future. This regulation has a significant impact on American financial services industry by placing major changes on the financial regulation and agencies since the Great Depression. This paper examines the history and impact of Dodd-Frank Act on American financial services industry.

Several factors could have affected our nation if the Federal Reserve did not step in and bail out Bear Stearns. One factor is our economy. If half of the Bear Stearns’ employees were laid off, the unemployment rate would increase and would affect the working class throughout the nation, and jobs would become harder to

“The Choice of Wall Street,” is the title of the first chapter in William Greider’s 1987 book, “Secrets of The Temple: How the Federal Reserve Runs the Country.” This chapter is basically the story of how and why Paul Volcker was chosen to be the new Federal Reserve Chairman. It all started in 1979 when President Jimmy Carter took a trip to Camp David with his most trusted advisers, the purpose of which was to decide on the course of action that needed to be taken to regain popular support so that he had a chance to win the upcoming Presidential election. All of his advisers understood that the economy was his most pressing issue. Inflation was incredibly high and all attempts to

world was credit. In 1924, after a sharp decline in business, the Reserve banks suddenly cre­ated some $500 million in new credit, which led to a bank credit expansion of over $4 billion in less than one year. The initial impact this new expansion of national credit was in the short term beneficial to the economy, but the end result was catastrophic. It was the begin­ning of a monetary policy that led to the stock market crash in 1929 and the following depression. As our Government did not realize the mistake they have made; this lead to global declines in consumer demand, credit was a key when it came to borrowing money from banks. As less banks loaned money, afraid that their would not be any return on their loans. Less people had money, which lead other economies to fail because their consumers did not have any money for consumer goods. Furthermore, financial panics worldwide caused even more panic as governmental policies caused economic and global market output to fall.

On account of the Wallstreet stock market crash which took place in 1929, the nation was put in a huge financial stress. Many people rushed to banks to take out their savings but once they got there, there was no money left. About eight-hundred banks closed and nine million bank accounts crashed (ABC News). Every cent that a family ever

instead dominate our lives. Indeed, if we had known all the tricks the financial industry was up to a year ago, we wouldn't have been surprised by the economic collapse.

Additionally, when America’s economy was melting in 2008, the Federal Reserve played a big role to stabilize it. Besides the Great Depression during the years 1929 through 1939 the worst economic time for the United States, 2008 was unmistakable one of the worst years of America’s economy history. When this economic recession was taking place, the Fed had to take action to avoid another depression and to stop a fall from the financial system. With the help of the Federal Reserve J.P. Morgan Chase and Co.’s they planned to help Bear Stearns (an investment bank) with financial assistance to help the government to buyout AIG, a well-known insurance company. This helped to produce a strategy targeting to stabilize the credit market and also the short-term interest rate from 45% to almost 0 from the benchmark (Coste). Thanks to the Federal Reserve and their well design plan to avoid another recession they prevented the economy of the world or better known as Macroeconomic system from falling and getting it

Investment banks use some of the money to invest in the stock market. If the stock market crashed, the bank would also crash and people would lose all their money. Furthermore, since brokers demanded investors repay their loans, investors were withdrawing savings from banks as well. This was happening on a mass scale, and banks did not have enough money to continue operating.

Many Americans went wild investing beyond their needs. They were investing with money they didn’t have. Investors had to pay ten percent of the total value of stocks at the time of buying. The rest they could pay in installments. The stock market could not be stabilized. There were huge amount of money being borrowed out of the stock market. There were huge number of new banks that were cropping up every single day. They didn’t have any rules telling them the amount of reserves that was allowed to be loaned out. They also didn’t have any regulations to determine the minimum capital required to start up a bank. The banks were closing faster than they were opening. The situations became worse when the stock market crashed in 1929. It loss around fourteen billion dollars of wealth. After the crash, the Securities and Exchange Commission (SEC) was set up. The purpose of the SEC was to protect investors from dangerous or illegal financial practices or fraud, by requiring full and accurate financial disclosure by companies offering stocks, bonds, mutual funds, and other securities to the public. After the crash there were temporary improvement in the market. The 1929 stock market crash was like a petty crash that led to a bigger market crash in 1932.

In Matt Taibbi’s article “The Great American Bubble” Matt talks about the financial crisis that occurred on Wall Street. He starts his article off by giving us a little information about the highest members on Wall Street. He goes on to talk about how smart and manipulative the bank is in making money. Then he discuses the five major bubbles followed by the people of Wall Street. The bubbles were “The Great Depression, Tech Stocks, The Housing Craze, $4 a Gallon, and Rigging the Bail out” Overall the bubbles were a scheme template for Goldman employees to sell bad investments to citizens leading them broke, homeless, and in starvation. This caused the price of homes and gas to go up but people were so worried about loosing their homes, the

Speculation was one of the main factors for the Wall Street Crash. There were other reasons for the Wall Street Crash but everything is connected. The Wall Street simply over-heated; between 1924-29 the value of shares rose 5 times. The Wall Street Crash was a horrible consequence for the Americans. People that lived in America thought they were doing so well because of the roaring twenties. People could afford almost everything they wanted, they could go out and spend money and buy many consumer goods. As the Wall Street Crash came people’s lives changed a lot and they couldn’t afford to do anything.

“Wall street has since then has almost tripled in size it has become a much bigger part of the economy” (Carroll 34-35). With better regulations wall street has been able to grow exponentially. It is completely run by technology now it is much more efficient and advanced. “Wall street’s innovated with things like penny stocks.” (Turnpike 66-69). Penny stocks are when an entrepreneur wants to start up a business they'll sell a percentage of their company for very cheap. Investors will invest in these companies helping they’ll become big one day like Microsoft making the investor millions. Wall street has changed over the years a lot becoming more technologically advanced and branching out to new innovative

Wall Street was in fact dominated by wealthy businessmen, many of which who made millions by solely “playing the market.” Indeed, people began believing that they would be able to do the same; to press a button and the stock would go up ten points. These stocks were also manipulated by the wealthy when they pooled their money into a secret agreement to buy a stock, inflate its price, and sell it to an unsuspecting public. Again, even though wealthy businessmen did everything in their power to attract the public, it was the individual’s fault for making a poor decision. The second least to blame for the stock market crash is the Federal Reserve Board.

Great question. The simple response is that well-developed, smoothly operating financial markets play an important role in contributing to the health and efficiency of an economy. There is a strong positive relationship between financial market development and economic growth. For example, in Chapter 1 of their 2001 book, Financial Structure and Economic Growth, editors Demirgüç-Kunt and Levine concluded:

The Wall Street Crash was a trigger for the collapse of the United States economy.On Tuesday the 24th of October lots of inverstors tried to sell their shares at once. this made share prices drop very fast. by the end of the day the stock exchange had lost four billion dollars. Many of the stock brokers sold shares on margin. To buy shares to begin with they had to borrow money from the banks. when the stock prices began falling the brokers needed to repay their debts to the banks. the only way to do that was if their customers payed them back. the customers had to sell their shares to pay the brokers back and they