ppclass9_reforms - Deregula(on •  In 1999, Congress...

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Unformatted text preview: Deregula(on •  In 1999, Congress passed the Gramm ­Leach ­Bliley Act, which repealed part of the Glass ­Stegall Act of 1933. The Glass ­Steagall Act was passed by Congress because financial firms had then encouraged debt to be invested in the stockmarket which then overheated the stockmarket. The act tried to prevent this by separa(ng the advising from the lending role of financial ins(tu(ons ie. commercial banks could not be investment/ advising ­banks] •  Legisla(on in 2000 to ban the regula(on by federal and state govs of over the counter (OTC) deriva(ves was key n the march towards the financial crisis….. •  In 1992, Congress/Clinton administra(on weakened regula(on of government sponsored etnerprises Fannie Mae and Freddie Mac. Aim to make available more money for the home loans. •  Said the pair would be required to keep a much smaller share of their funds on hand than other financial ins(tu(ons. Where banks that held $100 could spend $90 buying mortgage loans, Fannie Mae and Freddie Mac could spend $97.50 buying loans. REFORMS •  •  •  •  •  •  •  •  •  •  Linking bank bonuses to long ­term performance Tougher capital ra>os Too Big To Fail Separa>ng Consumer from Investment Banking ( proprietary trading , Deriva>ves and Clearing Houses New consumer financial products regulatory agency. Lending to Small Businesses One ­Off Bonus Tax Financial ac>vi>es tax on remunera>on Tax on Banks Balance Sheets ...
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