Advanced Search
MyIDEAS: Login

Different approaches to the causes and consequences of the financial crisis

Contents:

Author Info

  • Botos, Katalin
Registered author(s):

    Abstract

    Unquestionably the behavior of the financial institutes caused the US financial crisis which became a worldwide phenomenon. It is too easy but not enough to blame greedy banker (though not superfluous). The subprime crisis was the consequence of the profit-seeking activity of the different financial institutions (which belongs to the logic of the market). What happened was not against the market but according to the logic of the market. There were some mistakes in functioning of the market institution which must be corrected. These distortions were caused mainly by the intervention of the states. Competitiveness in the sector was confused by the belief that some big institutions will be saved by the state because they are too big to fail. (And at the end they were not disappointed, that was what happened.) According to Raghuram Rajan the fault lines causing the crises lay in the income situation of the society and in the government interventions. According to him too much state in business should be reduced. Financial institutions should take the responsibility of their activity, state should not rescue them, and probably only the very small institutions should have even deposit insurance. The customers of the financial institutions should learn to make differences between correct and too much risk-taking institutions. Another famous American expert, Richard Portes doesn’t share his views about too much state. He says the deregulation process which started in the early seventies has the main responsibility. There is much more state regulation necessary within and between states, maybe not in the midst of the crises but soon afterwards. Both scientists agree that the remuneration system of the financial sector employees should be changed and bound to the long term effect of their activity.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://mpra.ub.uni-muenchen.de/40334/
    File Function: original version
    Download Restriction: no

    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40334.

    as in new window
    Length:
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:pra:mprapa:40334

    Contact details of provider:
    Postal: Schackstr. 4, D-80539 Munich, Germany
    Phone: +49-(0)89-2180-2219
    Fax: +49-(0)89-2180-3900
    Web page: http://mpra.ub.uni-muenchen.de
    More information through EDIRC

    Related research

    Keywords: financial crisis; state intervention; banking regulation; fault lines; social safety network;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40334. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.