The Contention that Inadequate Regulatory Oversight in the United States of AmericaIntroductionThe sub-prime mortgages sector of the US economy is today believed to have triggered the 2008 – 2009 global financial crisis (Tirole, 2003, pp 102). This crisis when critically evaluated appears to have been a consequence of combined market failures, the US market being the epicenter of what would later turn out as a global quake. Experts currently agree the crisis was caused by three core failures (Stiglitz, 2010, pp. 307 – 342). Adverse US macro-economic conditions coupled by bad corporate governance (marked by greedy corporate boards) and more importantly punctuated by loose government regulatory oversight are the main causes of the crisis.
There are different perspectives on the contributing causes or which among the three was the most pronounced (Stiglitz, 2010, pp. 307 – 342). This critical essay argues that when the turn out of the crisis is reviewed objectively from without the US and its domestic justification, flawed governance practices (such as inadequate regulatory oversight) that are evident in both the private and public sectors plus a greedy corporate in the financial markets are the two causes that remain largely responsible for the 2008 – 2009 financial catastrophe.
The essay also argues with convincing evidence that the tendency to blame the crisis on the US corporate world downplays the role of the US government to protect the public from exploitation. The essay relies largely on secondary data observations and analysis of relevant banking procedures, practices and results to support the aforementioned contention. The Wrong ScapegoatIt is hard to conceptualize how minute losses experienced by the US subprime housing loans sector, which is only estimated to be about $100 million (early 2007) could lead to such a global economic and financial (Zandi, 2009, pp.
64-67). The crisis was perhaps the greatest since the Great Depression, and unlike any other in history, its impact was global. The worldwide stock markets dived to their greatest plunge in 60 years, the housing values all over the world declined sharply and world output reduced drastically (Norberg, 2009, pp. 58 – 79). The crisis was so major that IMF projected output losses to the tune of US$ 4.7 trillion starting from 2008 to 2015 consequent to the crises (Desai, P, 2003, pp.
58-91). Experts were mainly blind-sided and amazed by the speed and the magnitude of the financial crisis, even within the US market where it originated as well as in the rest of the world (EL-Erian, 2008, pp. 118). One thing is for sure, the small scale subprime market is not to blame since its size and its market significance could not trigger such a full-scale market failure even if it crashed completely.
Large corporations, wealthy investment banks and influential market players are the ones who triggered the meltdown, as was illustrated by the September 2008 collapse of Lehman Brothers. A series of very greedy decisions by the board, encouraged by an network of all-permitting government regulatory organs helped the Lehman kill the dreams of so many American investors. So significant was this greed and poor regulation that had Lehman been bailed out, experts believe that the U. S. financial system could have been salvaged before the subsequent melted down (Seter and Roubinini, 2009, pp.
171 – 182). Lehman represents the real culprits of the financial crisis, greedy financial corporate entities and a permitting government regulation.