How Government Intervention Could Possibly Affect Capital Markets Adversely – Coursework Example
How government intervention could possibly affect capital markets adversely A lot of people depend on the capital markets and have invested their life time savings and retirements in capital market investments, such that inadequate government policies or interventions would bring a lot of losses to them. Capital market investments are market for long-term funds where securities such as common stock, preferred stock and bonds are traded.
There are some indications that present government regulations in financial markets have not been enough to protect stakeholders. This was a conclusion held by Tom Quaadman of the Chamber Post who cited in his article the editorial of New York Times, saying that the new Administration of President Obama must now work on new regulation policies. He went on to say that in the light of the present economic crisis, the present government regulations have missed the warning signals and failed to protect the investors. This, he said is a clear indication that the present regulations need to be updated that should have been done even before the crisis begun. Quaadman said that certain gray areas in present policies must be addressed to allow the efficient movement of the market place. Innovations in the regulations are in place, he said, to allow market economic growth.
There must be a missing link or dark sports in the mortgage policies that have triggered the economic crisis, as implied in some actions of government authorities. George Stephanopoulos from the ABC News reports that President Obama is inclined to support a government plan to place mortgage giants Fannie Mae and Freddie Mac under federal control.(ABC News, 08 Sept. 2008) In this interview, Pres. Obama is firm in his resolve not to bail out shareholders, executives and management of Fannie Mae and Freddie Mac because they made a lot of money at the expense of the public because of lack of regulations. He said that he would not let the culprits get away with because “All those were private. We don’t want to make all those losses suddenly public and they get away without taking a haircut." (Stephanopoulos). Here, we see an example that lack of proper regulations poses adverse effect to public investors.
The report of Tom Quaadman (Dec. 2008) showed conclusion of a bi-partisan commission of the US which reported ineffective policies of the government which affect the following:
* We are now operating in a truly global economy and are facing unprecedented competition from around the world (not necessarily a bad thing);
* Our litigation system and outdated economic policies were placing our corporations and markets at a competitive disadvantage; and
* We have a 21st century economy that is saddled by an early 20th century regulatory architecture.
Source: Tom Quaadman. (2008)
Discussions and conclusions.
The intentions of any government should always be towards the benefit of its nation, its economy and its subjects. However, times are rapidly changing, technology is fast improving, and regulations are sometimes found wanting, lagging behind that for some reasons become the cause for market failure and losses. Conclusions gathered from articles reviewed showed that there is really a need for fast changing policy regulations that needs intervention of the government because only government authorities have the capability for the mechanism of change.
List of references
Quaadman, Thomas. 08 Jan. 2009 Capital Markets.A growth and prosperity for America. Chamberpost. [on line] available from Retrieved 11 Jan. 2009.
----. 22 Dec. 2008. Initial Public Offering/IPO. Chamber Post. [on line] Available from Retrieved 11 Jan. 2009.
Stephanopoulos, George. 06 Sept. 2008. Stephanopoulos: Obama: Government Intervention Necessary For Fannie, Freddie. ABC News. [on line] Available from http://blogs.abcnews.com/politicalradar/2008/09/obama-to-stepha.html> Retrieved 10 Jan. 2009.