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U.S. Money And Banking: Key Issue Facing Us In 2014, Regulating Our Banks

841 words - 4 pages

After the slow recovery following the crash of the U.S. housing market and the subprime mortgage and financial crisis that severely damaged the U.S. economy, the most important issue the U.S. is facing in 2014 is implementing and enforcing regulations of the banks. With regulations in place, similar acts that have been believed to play a major role leading up to the crisis can be diverted and avoided. Since the economy has begun its recover, putting in place certain regulations on the banks which control the monetary flow will allow the economy to continue to strengthen and avoid another crisis.
Subprime, or high-risk mortgages are defined as mortgages in which the borrower has a low ...view middle of the document...

There are various provisions in the act that were put in place intending to decrease risks in the U.S. financial system. With the act, came new government agencies with the responsibility of overseeing and implementing components of the act. The Consumer Financial Protection Bureau was put in place to prevent predatory mortgage lending and make it easier for consumers to understand the terms of a mortgage before finalizing the paperwork (Fontinelle 2014). The hope is to prevent mortgage brokers and banks from earning higher commissions for closing loans with higher fees and interest rates (Fontinelle 2014). Without taking into consideration that borrowers may not be able to afford these types of high rate mortgages in the future, banks approved these loans contributing to the crisis.
With the U.S. banking regulatory structure in place, any legislation that is passed is should be monitored for compliance to ensure the legislation is being adhered to. Banks are subject to examination where they are “examined” periodically by regulators to determine whether the bank is solvent and whether its business practices are prudent and safe (Ritter, Silber, Udell 2009). Unfortunately though as Timothy Geithner opinionates, noted in an article written by Richard Salsman, the financial crisis is to blame on insufficient government power to intervene and control reckless credit practices in the private sector. With special blame placed to bankers and the financial sector for having “no memory of extreme crisis” and “no...

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