Action forcing events.
The situation in Wall Street remains one of extreme fluidity both after the huge crash of 2008 as well as after the rise in flotations and privatizations which have continued dominating the financial markets of late. Government intervention remains important and this has proved to be largely successful over the past months and has saved several banks from total collapse. The action which was taken by the US government in saving banks such as Bear Sterns and Lehmann Brothers also saved the financial system from total collapse and ruin thus creating a pool for survival which continues to this day.
Background(history)
The background to all this financial disaster was the fact that banks who were in the investment business did not appropriately divide their investment division from their retail division with the situation proving fatal as the investment side continued to push aggressively for more loans and lending to property speculators with the result that a huge number of investments went awry and the banks finished up without any capital and the subsequent huge losses. This led to a huge collapse on the stock market with the result that the financial system totally collapsed and required government intervention to save from meltdown.
Analysis of failure and success
One can say that failure is a consequence of success and after the boom years of low interest rates and huge mortgages, something was bound to happen. However the gross irresponsibility of fund managers and investment advisors has to be taken into account here as this let to the total financial meltdown with millions of people losing their life savings and several banks going completely under because of all this. Naturally enough one is wiser with hindsight yet it has to be admitted that lax regulatory procedures also led to the whole meltdown and that could have been avoided.
Recommendations( how could we prevent this corruption in the future)
First and foremost, Wall Street should be completely regulated and no allowance should be made for lax decisions and unnecessary risks with financial instruments as these all lead to disaster as has been amply proved. The Banking act should be appropriately amended to ensure that there is a clear division between investment and retail banking and all this should be enshrined in a proper regulatory framework which ensures that no abuse is ever possible. Add to that the grossly irresponsible system of financial bonus to fund managers should be appropriately curtailed to ensure that banks remain solvent and not end up paying all of their money to someone who does not even deserve it. Governemnt should also be very vigilant on banks and other lending institutions to ensure that such errors and mistakes will not happen again.
Conclusion
Wall Street is a strange demon but it is also a necessary one for the proper functioning of the American economy. Additionally, Wall Street has to be much better regulated in all aspects and one must ensure that this regulation is not a top up thing as the situation will only get worse. The recent revival in economic fortunes is also important but again, this must not be taken for granted as things may change in an instant. A sound regulatory framework is the only answer to all this.
References:
"The World's Most Expensive Real Estate Markets". CNBC. Retrieved May 31, 2010.
The Best 301 Business Schools 2010 by Princeton Review, Nedda Gilbert. Retrieved May 31, 2010.
"New York Eclipses London as Financial Center in Bloomberg Poll". Bloomberg News. Retrieved March 30, 2011.
"The Tax Capital of the World". The Wall Street Journal. April 11, 2009. Retrieved May 31, 2010.
