Why Do We Regulate The Financial Systems? Essay

1000 Words 4 Pages
As I read through the laws that govern the securities industry, I asked myself the question of “ Why do we regulate the financial systems? Besides the basic understanding of having laws to better the efficiency of the investment and banking industry, why must we have laws and ethics that lay out the information of what is good and what is bad in the world of money, shouldn’t it already be known? In class we mentioned the issue with Goldman Sachs, ENRON, and some others companies who disobeyed specific laws in order to better the companies own economic benefit. When we study their thought process we notice that some of the problems are rather ethical, how come even with the regulations in place do firms and people not follow the specifics. Going back to my main question of why we regulate?

From the worksheet given and some reading I have done, I’ve realized that an important function of financial is to balance the interests of consumer of financial products and their sellers. To protect the consumers from big seller from taking advantage of, this can be in products or even in banks. We notice this in the Glass Stegall act, keeping the investment activity and banks separate. Which in turn helps the consumers of the banks and how asset banks run. We regulate finance over and above the way we regulate other industries because finance exhibits market failures that can have devastating consequences. When we add ethics to the mix, even though some regulations that are…

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