So what now?

Following the financial crisis came the biggest financial reform since the 1930s. On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was enacted in hopes of preventing another crisis. As part of the act, the Financial Stability Oversight Council was created to monitor all banks, as the failure of one bank, could impact others. Furthermore, the council seeks to improve synchronization between financial regulators. The Volcker Rule is another product of the act. It is intended to stop financial firms that are supported by government deposit insurance from trading in their favor. The act also created the Consumer Financial Protection Bureau to protect individuals from financial institutions. Furthermore, derivatives, or two parties agreeing on a product that does not belong to either party, now have to go to a clearinghouse to reduce risk (Markovich, 2013).

Continuing with budget reform, it is important to think big picture and long term, not just a short-term profit. Management departments and budget departments should also work closer with each other (Robinson, 2016). The practices in line with the Goldman Rule of relaxing ethics to profit should also be avoided (Watkins, 2011).

On a positive note, a 2016 study found that corporate social responsibility has been on the rise since 2009. Banks, larger ones specifically, are more active in social responsibility. Part of this is to improve their image following the financial crisis. These banks are also performing better. Some socially responsible actions include reducing deposit fees and helping lower-income communities, which benefit the customers and society as a whole. Additionally, it appears banks received the message that they are not invincible. These findings indicate the advantage of including corporate social responsibility in reform (Cornett, Erhemjamts & Tehranian, 2016). Moving forward, a recent Pew Research Center survey found 58 percent of the American population, both Democrat and Republican, believe the economy is higher than it has been since 2007 (Stokes, 2017).

 

References

Cornett, M. M., Erhemjamts, O., & Tehranian, H. (2016). Greed or good deeds: An examination of the relation between corporate social responsibility and the financial performance of U.S. commercial banks around the financial crisis. Journal of Banking and Finance 70. 137-159. Retrieved from http://www.sciencedirect.com.proxy1.ncu.edu/science/article/pii/S0378426616300565?

Markovich, S. J. (2013). The Dodd-Frank Act. Council of Foreign Relations. Retrieved from https://www.cfr.org/backgrounder/dodd-frank-act

Robinson, M. (2016). Budget reform before and after the global financial crisis. OECD Journal on Budgeting 2016(1). 29-63. Retrieved from http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?sid=cec0834f-fe49-4d87-81e6-d886946bc60b%40sessionmgr101&vid=4&hid=119

Stokes, B. (2017). As Republicans’ views improve, Americans give the economy its highest marks since financial crisis. Pew Research Center. Retrieved from http://www.pewresearch.org/fact-tank/2017/04/03/americans-give-economy-highest-marks-since-financial-crisis/

Watkins, J. P. (2011). Banking Ethics and the Goldman Rule. Journal of Economic Issues 45(2). 363-372. DOI: 10.2753/JEI0021-3624450213

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