Separation of Commercial Banks and Investment Banks Essay Example for Free

Separation of Commercial Banks and Investment Banks Essay One of the key concerns growing out of the debate on whether to separate or merge retail banking and wholesale/investment banking activities has been the stability of a nation’s banking system. The experience of the US banking system has suggested that merge of commercial and investment banks is a better approach to achieving stability. After the global financial crisis, the American economy went into recession. The policy priority of American government was then to intervene into its banking system so as to mitigate the impact of the crisis. One advantage of the merger of banks is that it can improve the overall condition of the economy (Khan, 2012). The merger of banks unites small and weak unit banks which will then be able to provide diverse services and with time, to reduce costs and gain competitiveness and efficiency. As will be argued below, contrary to the view that the merge of banks was responsible for the financial crisis in 2008 and Great Depression in 1930s, universal banks constitute one of the key solutions to the underlying cause of the financial turmoil in history. First of all, in 1930s, the Great Depression in America triggered considerable debates on the primary cause of the stock market crash. Analysts in favour of separation of banks have observed that the fundamental reason was the â€Å"overproduction of securities† resulted from the combination of commercial and investment banks (Casserley, Harle, and Macdonald, 2011). Until 1902s, national banks had no authority to issue securities. However, â€Å"the Civil War had been an explosion of new securities issued to finance railroads leading to the western Unit States and the expansion in public fields† (Hendrickson, 2012). Many state-chartered banks captured this chance and were involved in securities underwriting. Historical data has shown that compared to a number of merely 205 banks engaging in securities underwriting in 1922, there were approximately 5 times more national banks that were involved in securities underwriting in 1926 (Hendrickson, 2012). This sharp increase in securities underwriting resulted in deterioration of the quality of new securities and the â€Å"overproduction of securities†. To the contrary, others have opposed the separation of banks, arguing that the Great Depression actually had much to do with small local â€Å"unit† banks which constituted the fatal weakness in the banking system (Casserley, Harle, and Macdonald, 2011). This argument, therefore, suggests that the cause of the Great Depression was not the merger of commercial and investment banks but the separation of banks. Accordingly, they have pointed out that the increasing number of small banks as a result of the separation of banks could exacerbate the vulnerability of the financial system (Casserley, Harle, and Macdonald, 2011). The enactment of the Glass-Steagall Act in 1930s seems to provide an indication that the views in support of the separation of banks had prevailed over those in favour of the merger of banks. However, it is submitted that the Glass-Steagall Act had failed to solve the underlying problem of the US financial system. For instance, in 1980s, despite the operation of the Act, a third of small specialist financial institutions failed during the saving and loan (SL) crisis (Casserley, Harle, and Macdonald, 2011). This indicates that the statutory requirement of bank separation is not the right solution to the underlying problems in the US financial system. Secondly, the merger of banks has the advantage of helping small banks to become more competitive in the market because merged banks are able to provide broader and cheaper services than small specialist financial institutions, and consequently, to achieve reduction of operating costs and increase in revenue (Krainer, 2000). However, proponents of the Glass-Steagall Act have maintained that the merger of banks could generate two critical problems – â€Å"conflict of interests† and â€Å"too big to fail† – which, in their view, were responsible for the Great Depression in 1930s and the financial crisis in 2007 (Casserley, Harle, and Macdonald, 2011). In our opinion, the fact that the Glass-Steagall Act was repealed in 1980 indicates that the need for statutory permission of the merger of banks in the US had prevailed over concerns about the problems associated with the merger of banks. This further suggests that since the Glass-Steagall Act had failed to address the underlying cause of the Great Depression which was the fragility of small financial institutions, the repeal of the Act and permission of bank merger seemed to have been considered to be the way toward the establishment of a healthy and strong financial system in the US. Therefore, despite these problems that might arise from the merger of banks, the permission of bank merger has been regarded as a better approach to achieving financial system stability than the statutory requirement of eparation of banks. Thirdly, another argument for separation concerns the moral hazard issue that may arise from universal banks. According to this argument, the merger of banks may be likely to create incentives for banks to make irresponsible investment decisions at the risk of depositors and investors due to the expectation of universal banks that governments will protect them from failure (Casserley, Harle, and Macdonald, 2011). However, it can be argued that this issue is not attributable to government policies on bank merger or bank separation but to those which bail out banks at the verge of bankruptcy. In other words, such a moral hazard issue may arise not only in the case of bank merger but also in the case of bank separation as long as governments choose to compensate banks for their damages resulted from irresponsible investment decisions. Therefore, the key to solving this moral hazard issue is not to turn a policy in favor of bank merger into a policy in favor of bank separation; rather, it is for the governments to cease to provide bail-out for irresponsible banks so as to prevent them from making investment decisions that are harmful to the entire financial system. Indeed, the merger of banks may give rise to problems. However, it is suggested that these problems can be tackled by stricter government policies. For instance, the excessive involvement of banks in the production of securities may give rise to conflict of interests, an issue concerning the possibility of banks selling securities to customers without disclosing their own interest in such transactions (Casserley, Harle, and Macdonald, 2011). This potential problem can be avoided by government regulations such as the Securities Act 1933 which provided for rules of disclosure on securities offerings and established the Securities Exchange Commission to enforce them (Casserley, Harle, and Macdonald, 2011). Moreover, the moral hazard issue may also be addressed by government regulations of the financial market such as by requirements that banks must retain sufficient capital on account to compensate for losses and liabilities. The examples above demonstrate that government interventions in the banking system may effectively solve these anticipated problems of bank merger. In short, compared to bank separation, bank merger provides a better approach to fostering a stable and healthy financial system which is essential for the economic recovery of the US (Casserley, Harle, and Macdonald, 2011). Although the merger of banks has its own disadvantages, these disadvantages are not the root causes of the 1930 financial crisis and can be remedied by stricter government regulations. Therefore, it is suggested that while universal banks should be duly regulated, they are more capable to withstand financial turmoil than small banks, thereby making the merge of banks a better government policy than the separation of banks.

Magical Realism and Psychology Essay example -- Magical Realism Litera

Magical Realism and Psychology "Magical realism was first used by the art critic Franz Roh to designate the pictorial output of the Postexpressionist period, beginning around 1925" (Leal 120). Later, this term was applied to forms of literature. This type of literature contains characteristics such as real and unreal elements, no hesitation, and hidden meanings. Given these and other characteristics, it is easy to see that magical realism can be applied to things outside of literature, such as psychology. In magical realism stories, the places and things are real and unreal at the same time. Luis Leal states that "what used to be called empirical reality, or the world, seems to have become more and more unreal, and what has long been regarded as unreal is more and more turned to or studied as the only 'true' or 'another equally valid' reality" (153). Brooke-Rose says that the "inversion of real/unreal is perfectly logical" (qtd. in Leal 153). This quote seems to coincide with Faris' statement that the "wonders are recounted largely without comment, in a matter-of-fact way, accepted - presumably - as a child would accept them, without undue questioning or reflection" (177). From class discussion, I have found that there are also many ways to interpret the meaning of magical realism stories. "A dream is a sequence of moving images, based on a significant thought which may be either conscious or unconscious" (Hearne and Melbourne 42). Anthony Stevens says, "from the standpoint of dream psychology, the most extraordinary capacity of the human psyche is it's genius for fabricating images" (176). He states an image becomes a symbol when it is endowed with meaning (176). According to Stevens, "Dream interpretation...is an art,... ...reams. Magical realism has probably become popular due to its ability to transport the reader into a new world and make him or her forget about reality. Works Cited Borges, Jorge Luis. "The Circular Ruins". A Hammock Beneath the Mangoes. Ed. Thomas Colchie, N.Y.: Plume Printing, 1991. 25-29. Faris, Wendy B. "Scheherazade's Children: Magical Realism and Postmodern Fiction". Magical Realism Theory, History, Community. Ed. Lois Parkison Zamora and Wendy B. Faris. Durham Duke U.P., 1995. 163-190. Hearne, Keith and David Melbourne. Understanding Dreams. London: New Holland Publishers, 1999. Leal, Luis. "Magical Realism in Spanish American Literature". Magical Realism Theory, History, Community. Ed. Lois Parkison Zamora and Wendy B. Faris. Durham Duke U.P., 1995. 119-124. Stevens, Anthony. Private Myths Dreams and Dreaming. Cambridge: Harrard U.P., 1995.

In what ways did World War II end the problems of World War I Essay

In the days prior to World War Two, the First World War was referred to as â€Å"the War to end all Wars†. (Devine, 14) Despite this name, only twenty-odd years had passed before the nations of the world once again engaged in armed conflict. The treaty of Versailles and the conditions in Europe precipitated a second large-scale conflict in Europe. (Devine, 16) The conclusion of WWII ended the problems that derived from WWI by ending the Fascist dictatorships of Europe, ending European and Asian imperialism, and shifting military power out of Europe. The Treaty of Versailles created tremendous pressure on Germany, Austria-Hungary, and other nations who bore the blame for the conflict. (Morgan, 18) The economic depression in these nations that resulted from their attempts to pay reparations led to a political climate ripe for the rise of Fascism. (Morgan, 27) The people of nations such as Italy, Germany and Spain were willing to embrace this hyper-nationalist form of government, giving up their freedoms in exchange for the promise of better economic conditions and a return of their respective nations to international prominence. Morgan, 30) The rise of hyper-nationalism in Fascist Germany and Italy was one of the precipitating causes of the Second World War in Europe. Hitler’s Germany began to militarize and â€Å"reclaim† areas of Europe that Hitler declared to be part of the rightful German empire. (Morgan, 108) These regions included all of Austria, and part of the nation of Czechoslovakia, referred to by Hitler a s the Sudetenland (southland). When Germany invaded Poland to return the land to Germany, France and Britain declared war. The results of WWII ended the reign of fascism in Europe. ( Morgan, 117) The personalities around whom the fascist governments were built, Hitler in Germany, and Mussolini in Italy, were killed in the war effort, and their philosophies discredited when the atrocities they committed became public knowledge. (Morgan, 197) Of the Fascists of Europe, only Francisco Franco of Spain, which had remained neutral in the war, survived. (Morgan, 201) After WWII, Germany was divided into a Soviet-controlled Eastern half, and a Republican western half. Nationalist efforts were turned to reunification, rather than conquest. (Morgan, 203) The destruction of the German War machine was absolute, eliminating them as a future threat to stability in Europe. (Morgan, 205) Italy and Japan were similarly disarmed at the conclusion of WWII, making future threats to world stability from these powers unlikely in the extreme. (Morgan, 206) The end of WWII also marked the end of the naked Imperialism that characterized all the major European nations since WWI. Betts, 113) Britain, France, Germany, Japan and other nations granted independence, or protectorate status to their imperial holdings, making self-sovereignty the â€Å"new† goal of international foreign policy. (Betts, 127) Japan was forced to give up the Pacific Islands they had occupied, and withdraw their invasion of China. (Betts, 128) Germany similarly ceded their occupied territories and permitted free choice for the subsequent governments. Betts, 133) One of the world powers that emerged from WWII, the United States, embraced self-determination as the ideal for nations of the world, and began to fight against efforts to engage in imperialist activities on the parts of other nations. (Betts, 144) The conclusion of WWII marked a shift in the dynamic of world conflict. (Levering, 18) During WWI and WWII, dominance on the seas determined a large part of military control. After WWII, nations who had access to weapons of mass destruction became the powers of the World. Levering, 22) For the first time in modern history, the central conflict of the world was not between Britain and Germany or France, but between the United States and the Soviet Union. European powers became pawns in a worldwide power struggle between opposing ideologies. (Levering, 27) The United States used war reconstruction money as a lure to the nations of Europe to shun Communism in favor of republican government. (Levering, 34) After WWII, armed conflict was limited to third-party wars w here one side or the other effectively acted as a proxy for one of the Superpowers. Levering, 46) This was managed to avoid direct conflict between the Superpowers, which could have led to destruction of the entire world through nuclear annihilation. (Levering, 55) As a result, dozens of minor conflicts and a handful of major wars were fought after WWII by indigenous people with military and economic support from the USSR and the United States. (Levering, 58) This scenario played out in countries such as China, Korea, Vietnam, Nicaragua, Cuba, Afghanistan, and many others. (Levering, 75) It is clear that the effects of WWII resolved many of the issues that resulted from WWI. WWII ended European Fascism, eliminated European and Asian imperialism, and permanently shifted the balance of World Power away from Europe. The Treaty of Versailles produced conditions in Europe that made Fascism an attractive and popular option, which played a great role in precipitating WWII. As a result of the unresolved issues of WWI, WWII became the latest â€Å"war to end all wars†. It is hoped by the nations of the world that conflict on the scale of WWII never be repeated in the history of mankind.

Human Rights in The French Revolution - Free Essay Example

Sample details Pages: 3 Words: 964 Downloads: 5 Date added: 2019/06/14 Category Housing Essay Level High school Tags: French Revolution Essay Human Rights Essay Did you like this example? France, one of the greatest powers of the world, terrified other countries with its reign, but still was unable to control its own people. The citizens of France started to get tired of the mistreatment brought about by their government. The monarchy had been adding significant taxes to the people, overspending and broadening the debt of the country, and making the lives of the French miserable and poverty-stricken. Don’t waste time! Our writers will create an original "Human Rights in The French Revolution" essay for you Create order This caused economic and political turmoil throughout the nation and made the citizens want a new form of leadership. The idea to revolt was inspired and ignited by The Third Estate which represented 98% of the population. These individuals were later led by Napoleon Bonaparte to help end the corruption and discontent within France. The unstable conditions brought about by the expenditures of Louis XVI and the reign of terror made the people of France seek a stronger and more secure leader; which resulted in a revolution that changed the country. King Louis XVI was not a very good ruler and most of the people of that time knew that. He single handedly deprived France of its money and resources. The middle to lower class living conditions were terrible, and only the upper class lived in comfort. Louis XVI did not have sympathy for the poor, and only favored the Special Class which consisted of nobles, royalty and other people who had a lot of money (The Beginning of the French Revolution, 1789.). This Special Class only consisted of about 2% of the population of France. They were the ones who had the most benefits. The king and the nobles were greedy and refused to help the citizens. They used Frances money for their own well being and nobody else. With the money being wrongfully spend the citizens had to find another way of getting money. They tried farming, but the country had been on a drought for over two decades (French Revolution History). They tried every method possible at that time, to have a successful harvest. Even with every method possible they were unable to produce anything. They were getting extremely inpatient so the citizens with all these problems had nothing else do, but to demand the government for their help. Even with the whole population in poverty Louis XVI did not do anything to help. People were left with no other choice than to rebel against the government and search for a better and more just life. The king was unwilling to comply with the peoples demands, so they decided to fight against the government. It wasnt a simple rebellion; his mistreat made a whole new faction called the Third Stare which was composed of 98% of the population. These 98% of the population decided to rebel against the minority 2% (The Beginning of the French Revolution). With a lot of effort and in less than a year King Louis XVI was guillotined. This didnt had effect they were expecting, the killing of the King backfire and the Reign of Terror Began. In June of 1793, the Jacobins seized control of the National Convention, and established a new government, a new calendar, and the extermination of christianity. (French Revolution History.) For the next 10 months of the Reign of Terror thousands of revoluti onary enemies were guillotined. This caused a lot of hysteria, which was believed to be the end of France. People were scared and didnt wanted a rebellion so much now. When everyone thought that everything was going to end, and that there was no point in fighting, a leader stepped in and took control of the situation. This leader was named Napoleon Bonaparte. He, with massive effort, was able to put an end the Reign of Terror (Cause of French Revolution: Political, Social and Economic Cause), which was a relief for most of the French population. After he terminated the Reign of Terror Napoleon established the first ever bicameral legislature. Yet this wasnt enough to create a corruption free and fully functional government. Still there was population discontent, financial crisis, and inefficiency. Napoleon saw this and decided to change even more the government. He eradicated the Directory, and was able to name himself and create the first consul (Age of Enlightenment, Impact The French Revolution). With Napoleon as Consul finally the people were at rest and in the late 1890s the revolutions came to an end. With Napoleon, France underwent through m any changes. France completely changed their political landscape, centuries of absolute monarchy and feudal system came to an end (French Revolution History.). France went through a lot in only one year, and many changes were made. Century old ways of being were changed for the better. With the help of Napoleon the people of France were able to be freed from their poor living conditions, and finally experienced equality. This all happened with the expenditures of King Louis XVI and his Nobles, however it could have been deterred had the king and his Monarchy listened to the citizens of France.. They thought that they could get away with whatever they wanted, but the people were not going to sit back and take the abuse. The commoners united and fought for a better government, and in the end those lives didnt die in vane as France was able to eradicate the anarchy and establish their own government. This was the moment that many citizens were waiting for throughout the years. It finally came with the leadership of Napoleon Bonaparte in the late 1890s. If he had not intervene and reformed France, who knows what would have happened to France. The French Revolutions Inspired many other European countries to rebel for their rights. If had not intervene most of Europe will probably still be a monarchy and millions of people would have never gotten the freedom they deserved.