The Financial Crisis Of The Great Depression - 1571 Words

In the words from Ben Bernanke, â€Å"September and October of 2008 was the worst financial crisis in global history, including the Great Depression† (Yahoo Finance 2014). The effects from the banking, or credit, crisis were felt worldwide. Starting back when the investment banks went public and lobbying for deregulation, resulting in risky investments with creative ways to hide these investments can be directly correlated with the causes of the crisis. The effects, consequently, are catastrophic and are still lingering on six years later. What was one of the first causes for this meltdown? Even six years after the fact, people are still unsure. I believe that it started when the investment banks went public. When a company goes†¦show more content†¦The Gram-Leech-Bliley Act allowed this merger to be legal. This act, which revoked the Glass Steagall Act, was the largest achievement for the lobbyists for Wall Street (Repealing Glass-Steagall section, para. 7). This allowed the banks to keep growing and growing so that they were becoming too big to fail. Allowing this merger made it clear to firms that with enough time and money, anything can happen. In the movie Inside Job Willem Buiter states that â€Å"why do you have big banks? Well, because banks like monopoly power; because banks like lobbying power; because, banks know that when they’re too big, they will be bailed† (2010). When a single entity has this much power, they will be riskier in their investments which leads to higher short run earnings but destroys the firm in the long run. And with that assurance of being bailed out, they will not care how risky the investments are, just as long as they get their large bonuses. Christine Lagarde brought up this point during Inside Job in saying that â€Å"the financial industry is a service industry. It should serve others before it serves itself† (2010). She is insisting that ethics should be one of the fir st things under consideration. I believe that the paying customers should always be the top priority. Firms usually want to sell their loyal customers a great product, but in this case the firms sold their customers crap investments