How have financial institutions in the USA affected our economy and the economies of other countries?
Financial institutions in the US have had a very large effect on the economies of not just the US but countries around the World.
The present financial crisis is primarily the result of their reckless behavior that initially earned large returns but which could not be sustained for long. When the large bubbles that were formed due to this burst it led to losses in the tune of trillions of dollars; there was a steep drop in prices, a reduction in consumption and a reduced genuine investments into companies. This led to a fall in industrial activity, unemployment, and is mainly responsible for all the hardships we are going through.
Financial institutions definitely have a major impact of the American and the global economies. Partly, though, their influence has been magnified by the fact that the government is now so largely involved in the economy. Repeatedly, in recent years, both in the U. S. and in Europe, financial institutions have taken risks in part because they assumed (rightly) that they had become "too big to fail," and that if they did fail they would be bailed out by governments.
Financial firms of late have damaged our country perhaps beyond repair all due to greed. They get paid to take risks and paid to get money on short-term gains even if the long-term prognosis is not good. Many companies have lied or not told the whole truth. They look for loopholes and seek profits at the expense of honesty. This might sound too strong, but examples are everywhere. John Corzine, the former chief of GS and the former governor of New Jersey is the latest one in the news with the bankruptcy of MF global. And if financial firms are too big to fail, they are all bigger. It is completely ridiculous.
While I am sure that I am not going to answer this question as well as the previous editors, I have a very different point to make. I feel as though the financial institutions in the United States tend to take advantage of the people who entrust their money to them. Credit companies, wanting to increase their profits, charge outrageous fees for interest and late payments. (While I know that consumers are at fault for accepting, some people simply have no choice when they find themselves in dire situations.) I guess that it is just the fact that the government is so easily willing to help major corporations which are supposedly beneficial to the economy when those who need their help most are defaulting on mortgages and other loans.
My "favorite" (I laugh hysterically at the obnoxiousness) commercial is the one where a loaning company states that they have money to loan and the money is "expensive." If you look at the small print at the bottom, the company charges something like 128% on the loan. This is why our country is in the state that it is.
This question can be answered by analysing the unwise lending and borrowing practices of financial institutions in the US and how they as a result plunged the world into an economic crisis which we are likely to suffer the effects of for a long time. The practice in particular of sub-prime mortgages is one area that has been particularly highlighted as being very unwise financially.
You need to look no further than the many American financial institutions that defaulted on loans in the past few years to see how it affects the worldwide economy, which has been plunged into international financial chaos. Several countries, such as Iceland and Greece, are close to bankrupt and have been subjected to bailouts.
Financial institutions in the United States have been a major backbone of the US economy. Ever since the US has started to move away from being an industrial economy and move towards being a service economy, the financial sector has been extremely important. This sector has been the world leader in financial services and has typically been a source of stability for the world economy.
Of course, this has been less true in the past few years. The financial industry can, in many people's eyes, be blamed for the financial crisis that led to the "Great Recession." This crisis has been extremely harmful both to the US economy and to the economies of many other countries around the world.