Research Paper: Too Big to Fail

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¶ … big to fail issue is a term that describes financial institutions that were involved in developing the global financial and economic crisis. These financial institutions are interconnected in a large network. Although these institutions seem to be competitors on the financial services market, it seems that their activity is developed on the relationships between them, and this is likely to affect their customers, national economies, and the global economy. One might wonder why these institutions need to work interconnected instead of competing in traditional manners. Their interconnectedness increases their strength. This strength is required in order to fight back any attacks from the state's authorities. These institutions cannot be successful on their own, they must associate with other institutions in order to increase their power of influence.

This refers mostly to Wall Street banks. The problem in this case is that these banks seem to send the message that they are not too be touched. No matter what strategies they develop, and the effects that they have for the U.S. economy, they do not suffer any of the consequences. It is important to understand who are the decision making factors that have the power to address the problems determined by Wall Street banks. It is obvious that regular customers and citizens have no power over the activity of these banks.

There are also other types of customers. This refers to important Wall Street players. They invest important sums of money. They also have little power over these important banks. In addition to this, they have no interest in attacking them. These Wall Street investors benefit a lot from their relationship with bankers. They gain significant sums of money from playing on the Wall Street stock market. Therefore, it is not in their interest to take action against these banks.

This is a position and approach that can be easily understood. One cannot ask these players that make a lot of money out of their relationship with Wall Street bankers to attack them, although they must be aware of the effects they determine on the national economy. However, it seems that the effects on the national economy are of less importance to Wall Street players in comparison with the benefits they receive from these banks.

Therefore, it is important to determine who should address the too big to fail issue. It is obvious that the state authorities must take action against the activity of Wall Street banking institutions. This is because these authorities have the legal power to significantly influence the activity of Wall Street banks and to reduce the effects they have on individuals, on companies, and on economies in other countries also.

However, this is only applied in theory. In reality, it seems that the state's authorities have the opposite approach to banking institutions. Several journalists and observers of the phenomenon have stated that most members of the Congress, or senators, "treat these bankers like royalty." These journalists also consider that these bankers should be treated like institutions that have significantly influenced the reduction of jobs in the U.S., and the increase of unemployment.

Therefore, it seems that regular people have a very different opinion on these bankers in comparison with what politicians think. There are several factors that influence politicians' stand on Wall Street bankers (America blog, 2013). The most important factor of influence is represented by the fact that these Wall Street bankers finance the electoral campaigns of these politicians. They invest important sums of money in these campaigns and expect something in return. They expect these elected politicians to help them in situations of trouble where they are accused of wrongdoing to their customers, to companies, and the country's economy.

However, not all politicians address the same position when it comes to Wall Street issues. This is the case of Elizabeth Warren, a Democratic senator from Massachusetts. Warren has expressed her opinion on Wall Street banks a number of cases. In addition to this, the senator has also expressed her opinion against other politicians that should have acted against Wall Street bankers, but have not.

In senator Warren's opinion, the system that involves these bankers, politicians, and the state's authorities is a dysfunctional one that requires the joint efforts of several categories of stakeholders in order to solve the too big to fail issue. There are several agencies that should focus on monitoring and controlling the Wall Street activity. But it seems that they do not do this. Senator Warren has publicly approached such issues. In other words, Warren has addressed the head of the Office of the Comptroller of the Currency several questions on the agency's activity.

Warren wanted to ask the agency's head why they do not take more Wall Street banks to trial. But the response of the head of this office was that they do not require that people are brought to justice. In his opinion, this does not influence the activity of Wall Street banks, and it does not benefit the U.S. He also stated that the agency has agreed on numerous consent orders, and settlements. This is important. However, the agency must also take other actions in such cases in order to really impose itself on Wall Street bankers.

Warren does not agree with the agency's manager's opinion that this agency only has a supervisory position. The senator has also compared situations where individuals with very small law breakings have been brought to justice, but banks in the too big to fail issue, that have produced such significant effects, are not addressed by prosecutors. Therefore, it is difficult to determine what solutions can be developed to this issue.

It is obvious that this has become an important problem for individuals, for politicians, and for the country's economy. In addition to this, the state's agencies are in charge of addressing this issue. But this cannot be performed by just one agency. It is important to develop a strategy that addresses the combined efforts of several state institutions. This is because one institution does not have the competence to address all types of issues.

Some of these institutions must establish the regulatory framework based on which Wall Street banks can develop their activity. Other institutions must ensure that these rules and regulations are applied by these banks. There are also other institutions that must monitor, control, and apply the legal consequences in situations where other institutions or banks do not apply these regulations.

The issue of too big to fails banks seems to increase in importance to the country's individuals. This issue is not of interest to the state's authorities only, but also to other categories of stakeholders. The attention of the press is concentrated on what is likely to happen in order to address this issue. There are several questions that the press usually addresses. These questions refer to whether the authorities will do something about the too big to fail issue, and what are they going to do.

There are numerous requests in order to address the banks that have determined the financial crisis, and that have also benefitted from important bailouts. Certain lawmakers and regulators consider that the country's financial system is not in accordance with its needs and requirements (Irwin, 2013). This is because the system includes banks with assets of trillion dollars, developing global operations that they cannot manage because they are too complex, but also guarantees from the government that these important banks are likely to be bailed out if necessary.

In order to address the too big to fail issue, it seems that it is important to separate these banks and to address them individually. This is because when grouped together, their power of influence significantly increases. Therefore, it is necessary to reduce their power of influence. This objective can be reached by dividing these groups of large banks.

It seems that this strategy can be successful, because a number of countries have already developed laws and regulations that are intended to reach this objective. Therefore, the British government has proposed a law that is intended to divide giant banks that refuse to separate trading activities that have higher levels of risk from normal banking services. However, there are also certain bank regulators that stated they are against such laws. There are also other regulators that state that they favor the divisions of these banks but do not do anything in order to reach this objective.

The regulators that are against this strategy provide several arguments. In other words, they consider that these large banks provide great value to the global economy. In addition to this, the costs associated with dividing these banks are too important. Their arguments must be analyzed in order to determine whether they hold water or not. It is obvious that these large banks provide great value to national economies and to global economy. Their power of international influence is well-known.

They also have benefits on the activity of companies in different countries. Their power of finance can be… [END OF PREVIEW]

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Too Big to Fail.  (2013, March 3).  Retrieved July 22, 2019, from https://www.essaytown.com/subjects/paper/too-big-fail/4926122

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"Too Big to Fail."  Essaytown.com.  March 3, 2013.  Accessed July 22, 2019.
https://www.essaytown.com/subjects/paper/too-big-fail/4926122.