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13 Bankers Essay

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The United States has routinely been an economic leader in the world since its emergence 235 years ago. The fundamental idea of big bank versus small bank dates back to the founding fathers, when Thomas Jefferson and Alexander Hamilton fought over the institution of a federally chartered bank. This same issue of governmental intervention and influence on the banking system that had first been introduced with Jefferson and Hamilton exists to this day. In the book 13 Bankers: The Wall Street Takeover and the Next Financial Crisis by Simon Johnson and James Kwak, the authors revisit the history of the banking system and analyze the changes that have impacted its current role in the United States economy. In analyzing, they hone in on the relationship dependency between the politicians and Wall Street, which, in their mind, caused inadequacies in the regulations in the banking sector leading up to and after the 2008 financial meltdown. Prior to 2008, leaders and analysts truly believed that the United States had a more stable and prosperous system than that of emerging immature markets. This naïve thinking, which was built on the idea that the United States had continuously grown at a rapid pace for hundreds of years, caused politicians to deregulate the system despite seeing these “immature” countries fail using the same tactics. Over time, through continual deregulation, the United States banking system collapsed; the system hit a breaking point in 2008 when the financial system ultimately collapsed into a recession. Two main developments in the United States that were significant in the years leading up to the 2008 crisis were the exponential growth in the financial industry and the creation of new products that were profitable to banks. In the Glass-Steagall Act of 1934 provisions were put in place to limit the bankers’ influence on the entire economy; however, as policies became more bank friendly through deregulation, the banking system grew dramatically. The growth in the industry was astounding during this period. Two confirmations of this occurrence are: the financial sector grew from 3.5 pe...

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