BUS670 Week 3 Discussion 1
Regulation and the Greater Good
After viewing The Crisis of Credit Visualized video, respond to each of the following:
1. How could government regulations have prevented or mitigated the credit crisis of 2008?
The government could have placed tighter constraints on the credit market; the government agencies charged with managing banking policies and procedures could’ve formulated a policy that would require that banks were only able to hedge a certain amount of liability as long as they had enough capital to cover double the amount of the liability. The government could also have placed more stringent regulations on banks and related financial institutions to provide proof that the potential buyers of homes could fiscally make the required home/mortgage payments in lieu of the poor economy. This could have been accomplished by verifying their credit score, annual salary, and reviewing 6-12 months of the potential homeowner’s financial statements to ensure their candidacy and responsibility. Another regulation that could have averted the 2008 credit disaster would be requiring all potential home buyers to take a financial course that included content covering how to read legal contracts” or something similar. Yes, this additional step would prolong the home buying process but in the long run it would potentially weed out the vast majority of homeowners that would likely default on their mortgages.
2. Discuss whether too much governmental regulation of business or too little governmental regulation of business presents the greater danger to:
a. the greater good
b. business
Too little governmental regulation can be detrimental the greater good. If business activities were left unchecked we would have cars that catch on fire as soon as we start them, the foods that we purchase would be tainted with arsenic or other deadly toxins, children’s toys would be colored with lead paint and cigarettes would still have a host of poisons in addition to nicotine. Each of
After viewing The Crisis of Credit Visualized video, respond to each of the following:
1. How could government regulations have prevented or mitigated the credit crisis of 2008?
The government could have placed tighter constraints on the credit market; the government agencies charged with managing banking policies and procedures could’ve formulated a policy that would require that banks were only able to hedge a certain amount of liability as long as they had enough capital to cover double the amount of the liability. The government could also have placed more stringent regulations on banks and related financial institutions to provide proof that the potential buyers of homes could fiscally make the required home/mortgage payments in lieu of the poor economy. This could have been accomplished by verifying their credit score, annual salary, and reviewing 6-12 months of the potential homeowner’s financial statements to ensure their candidacy and responsibility. Another regulation that could have averted the 2008 credit disaster would be requiring all potential home buyers to take a financial course that included content covering how to read legal contracts” or something similar. Yes, this additional step would prolong the home buying process but in the long run it would potentially weed out the vast majority of homeowners that would likely default on their mortgages.
2. Discuss whether too much governmental regulation of business or too little governmental regulation of business presents the greater danger to:
a. the greater good
b. business
Too little governmental regulation can be detrimental the greater good. If business activities were left unchecked we would have cars that catch on fire as soon as we start them, the foods that we purchase would be tainted with arsenic or other deadly toxins, children’s toys would be colored with lead paint and cigarettes would still have a host of poisons in addition to nicotine. Each of