Negative Consequences of Deregulated Global Financial Infrastructure

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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 Signup and view all the answers

What type of mortgages were becoming increasingly popular in the United States?

Adjustable-rate mortgages tied to short-term interest rates Signup and view all the answers

What innovative instrument hid problematic loans by bundling them with lower-risk assets?

Collateralized debt obligations Signup and view all the answers

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. Signup and view all the answers

Why did Southeast Asian governments abandon control over the domestic movement of capital in the early 1990s?

In order to attract foreign direct investment. Signup and view all the answers

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. Signup and view all the answers

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. Signup and view all the answers

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. Signup and view all the answers

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. Signup and view all the answers

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. Signup and view all the answers

What led Southeast Asian governments to abandon control over the domestic movement of capital in the early 1990s?

To attract foreign direct investment. Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What type of loans were investment banks buying from mortgage brokers fueled by promises of big commissions?

Subprime loans Signup and view all the answers

Which innovative instrument hid problematic loans by bundling them with lower-risk assets and reselling to investors?

Collateralized debt obligations (CDOs) Signup and view all the answers

What type of mortgages were gaining popularity in the United States, often tied to short-term interest rate fluctuations?

Adjustable-rate mortgages Signup and view all the answers