Bank Failures over Last 25 Years Essay Example for Free

Bank Failures over Last 25 Years EssayThe banks began to fail because of peculation of pecuniary resource and loose lending practices to the majority of the US citizens living above their means. The government estimated 2,657 closures from bank failures from 1987 to 2012 (http//bankvibe. com). Currently, there is a total 7,074 FDIC insured banks (http//www. mybankertracker. com/banks). This caused was from reference book stipulations were displace to exclusivelyow the subpar credit working Americans to obtain personal loans, car, homes or other amenities.Most banks were very stable alone were not prepared for the financial ruffle to burst in the distance near future. Moreover, in my experience with working for a few financial institutions, I observed the credit parameters amended to delay a customers financial state. These loans stipulations were as follows no documentation, no income, no assets, or no verification job underwriting went only off credit score in some case s. The elegant, mid-size, and corporate banks are all competing for the publics business which caused disarray of bad banking decisions.Hence, the banks that failed from 1987 until present time in researching demise 25 years we dont read much about these failures in our daily newspapers, simply just there is an over abundant of banks failures all day and this has become very common (www. davemanuel. com/history-of-bank-failures-in-the-united-states. php) Nevertheless, these banking behaviors caused a massive failure of mortgage banks and commercial banks.This caused the government to become very involved when Freddie Mac and Fannie Mae were impact by these lending behaviors (Johnson, 2010, p. 4-28). My research will display the trend of impuissance banks over the last 25 years and data will give shrewdness on the numbers of banks. The Federal Reserve had centralized banking responsibility to save the banks, they deemed too oversized to fail. The depositors decide to simultaneo usly withdraw their funds from banks, which resulted in a bank panic. If several banks experience these actions at same time, this throws the banks into a bank panic.The Feds loan the banks money at a discounted rate to sustain these indiscretions (Hubbard Obrien, 2010, p. 37). Consequently, the US Congress started holding hearings, and questioning these huge corporate banks whose bonuses, incentives, and other loose business practices. These banks closed, sold, or merged with other banks to survive inevitable reality of failing (NAOAKI, 2011, p29). The investment banks were also involved in the buying and selling of bundled mortgages, investments, or other banking products to raise their capital. Lehman Brothers, Bear Stearns, and Countrywide were guilty of such practices as seen all over the TV national news.These companies keep back been either sold or closed down after the hearings on Capitol Hill. Currently, In order to resolve this crisis, banks have drastically changed thei r lending practice and the closure of failing banks has slowed down. Corporate banks were also beginning to receive stimulus funds to save them from failing. The government found themselves in a position of using the Feds to prevent catastrophic melt down of financial industry.The 12 districts are replenished to keep the general public getting loans thus, property money in circulation (Hubbard Obrien, 2010, p. 438). All banks did not take the stimulus funds, but devised a plan to prevent failure. Therefore, banks had to pay back the loans in the billions, but were not charged interest if they paid the funds back early. The small to mid-size banks were left to fail, because they were not too big to fail. A double standard was shown to small businesses the backbone of America (http//economics. bout. com/).A bank of ineffective practices has shown small mom and pop banks they should not try to compete with Corporate Banking in America. They are not going to be bailed out, and allowed to fail. These small or mid-size banks are microeconomics not in macroeconomics equation of America big businesses. In conclusion, the bank failures are significant to our saving tremendously regardless the size, from the housing market, investments, or checking/savings accounts.The Feds saved the banks worth saving to boost the economy and slow down inflation. Perhaps, further research conducted to termination the following questions, and ask the questions Do you think if people were given the stimulus funds instead of the banking institutions? What kind of economic boost would banks have, if the citizens were given stimulus funds? How does the government determine who receives funds to survive a financial set back? Why are parts of corporate America deemed too big to fail?