Effect of Regulation/Deregulation
This paper illustrates that the 1994 Interstate Banking and Branching Act allowed banks and other financial institutions enter into interstate banking transactions. Prior to the act, Mr. Glaeser reiterated the banks and other financial intermediaries were prevented from legally entering into any interstate banking agreements. The act significantly allowed the increase of interstate mortgage credit transactions. Likewise, the relaxing of mortgage credit requirements was lessened. With the lessening, more people were able to have their housing mortgage papers approved. As expected the quantity of mortgage credit loan application disapprovals had significantly dropped. As expected, the new regulation’s allowing more mortgage credit transactions led to the rise of housing prices. There was an easing of the mortgage loan requirements from 1998 until 2006. Further, the loosening of mortgage home application requirements encouraged the financially incapable residents to accomplish one of their basic needs, a family home. People who could not afford homes were able to easily received approved home mortgage loan contracts. When the time for home mortgage payments arrived, the majority of the cash-strapped homeowners failed to pay their obligations. Consequently, the banks suffered from the non-collection of the monthly home mortgage receivables, forcing many banks to close shop. Furthermore, the financial crisis cropped up in 2007. During 2008, the people felt the effects of the financial crisis. The 2008 financial crisis started silently during 2007. The financial crisis officially roared its debilitating head in 2008. The unfavorable effects of the 2008 financial crisis continue to financially and economically roar until today. is the rise in the housing prices. Similarly, the United States housing mortgage crisis of 2008 can be economically explained. As of 2007, the total United States home loans reached $ 12 trillion. The banks had to absorb the ten percent financial crisis write-down of the losses, $1.2 trillion. However, the entire United States banks were forced to absorb $ 0.6 trillionlosses.