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United States financial crisis

1. What are the three-stages found within a financial crisis for the United States?

2. What are the eight basic facts that support the reason for having financial institutions?

3. What are the issues that are involved with the idea of moral hazard?

4. What can financial institutions offer in terms of transaction costs vs. alternatives?

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1. What are the three-stages found within a financial crisis for the United States?

The three stages that encompassed the financial crisis are regulation and supervision, securitization and a run on investment banks. The three stages point to regulatory supervision failure. The financial crisis could have been prevented if existing regulation would have been enforced at the appropriate time. The financial crisis can be place at the feet of the financial regulators, who were asleep at the wheel. If they had performed there function, the additional regulation that was implemented would have not been needed. The financial crisis went through the three stages until Lehman Brothers collapsed, which lead to the recession. After the recession began, the government turned its attention to stabilizing the economy and employment. After which, the government switched its attention to shoring up the economy and introducing additional financial regulation (The information was obtained at http://www.levyinstitute.org/pubs/wp_585.pdf "Is Reregulation of the Financial System an Oxymoron?").

2. What are the eight basic facts that support the reason for having financial institutions?

The eight facts of the financial structure are as follows:
(1.) Businesses have ...

Solution Summary

The solution discusses the United States financial crisis.

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