20 Questions
What was the 1999 initiative that significantly impacted the US finance sector?
Repeal of the Glass-Steagall Act
What are some examples of esoteric financial instruments that became popular after deregulation?
Derivatives, financial futures, credit default swaps
How did financial institutions pass on risk to investors?
By borrowing from each other and selling loans as securities
What type of loans were investment banks buying from mortgage brokers?
Subprime loans
What type of mortgages were becoming increasingly popular in the United States?
Adjustable-rate mortgages tied to short-term interest rates
What innovative instrument hid problematic loans by bundling them with lower-risk assets?
Collateralized debt obligations
What were the consequences of the deregulated global financial infrastructure in the Southeast Asia Crisis of 1997–8?
Economic output fell, unemployment increased, and wages plummeted.
Why did Southeast Asian governments abandon control over the domestic movement of capital in the early 1990s?
In order to attract foreign direct investment.
How did the Southeast Asia Crisis of 1997–8 impact the region?
The entire region found itself in the throes of a financial crisis that threatened to push the global economy into recession.
What measures helped avert a global recession during the Southeast Asia Crisis of 1997–8?
International bail-out packages and the immediate sale of Southeast Asian commercial assets to foreign corporate investors at rock-bottom prices.
What were some of the negative consequences of the deregulated global financial infrastructure that became visible in the Southeast Asia Crisis of 1997–8?
Economic output fell, unemployment increased, wages plummeted.
What measures were taken to prevent a global recession during the Southeast Asia Crisis of 1997–8?
International bail-out packages and immediate sale of commercial assets to foreign investors at low prices.
How did the crash of 2008 have its roots in the 1980s and 1990s according to the text?
US governments under Presidents Reagan, Bush I, and Clinton pushed for significant deregulation of the domestic financial services industry.
What led Southeast Asian governments to abandon control over the domestic movement of capital in the early 1990s?
To attract foreign direct investment.
What was the purpose of the Glass-Steagall Act signed into law by President Roosevelt in 1933?
To prohibit commercial banks from engaging in investment activities on Wall Street
What were some of the consequences of the 1999 repeal of the Glass-Steagall Act?
The birth of huge financial-services conglomerates eager to engage in securities ventures
How did financial institutions pass on risk to investors after the repeal of the Glass-Steagall Act?
By borrowing from each other and selling loans as securities
What type of loans were investment banks buying from mortgage brokers fueled by promises of big commissions?
Subprime loans
Which innovative instrument hid problematic loans by bundling them with lower-risk assets and reselling to investors?
Collateralized debt obligations (CDOs)
What type of mortgages were gaining popularity in the United States, often tied to short-term interest rate fluctuations?
Adjustable-rate mortgages
Learn about the possible negative consequences of a deregulated global financial infrastructure by exploring the 1997–8 Southeast Asia Crisis. Understand how the abandonment of control over the movement of capital led to an influx of global investment, resulting in soaring markets followed by a crisis.
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