Deregulation of the current financial system

Deregulation of the current financial system

Trump’s intent on deregulating the current financial systems has its plaudits as well as those who disapprove. During the financial crisis of the late 2000s, the Obama administration passed various regulations to prevent its recurrence in future (Dayen, 2017). These regulations include the Wall Street Reform and Consumer protection Act colloquially known as the Dodd-Frank Act among others.  Analysts point out that on its own, the act has created a crisis which has restricted bank lending and reduced the amount of liquidity available in financial markets (Cohan, 2017).  The gross domestic product (GDP) growth rate that has more or less revolved around 2% per annum is largely blamed on the current financial regulation.  The current financial system which has starved the economy of funds to invest is being blamed for the slow growth in the economy.  The popular idea of breaking up large banks does not make economic sense as it creates small banks which will be risk averse and will be unwilling to lend to small businesses (Dayen, 2017).

The current financial system should be deregulated with the aim of encouraging banks to take on more risk and lend to small businesses. Small businesses have been starved of capital due to the negative effects of the Dodd-Frank Act (Cohan, 2017).  By deregulating the financial system, banks will increase lending to small businesses which will in turn help the economy break out of the vicious cycle of the 2% growth in GDP as more investments will be undertaken in the economy (Cohan, 2017). Employment levels will rise as firms will hire more people as they expand.  Staff morale will be boosted as firms will be able to afford salary increments for existing staff.  Currently, only the rich have seen their wealth grow but the average middle class have not received any substantial wage increase due to the slow growth in the economy (Dayen, 2017).


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