What All have gone Wrong in US Financial Markets?
Back in the 1970s, the US economy was subjected to an unprecedented wave of credit squeeze as the Fed Chairman, Alan Greenspan, launched a series of monetarist strategies to contain inflation. Reacting to above, financial innovations led the way to credit creation beyond the usual banking orbits. Thus a large number of US firms started having access to short-term credit by using, as collaterals, securitised assets like commercial papers.(3) As the wave of securitisation (of assets) caught on, new forms of financial intermediation were provided by investment banks which lent their expertise in re-packaging the securities which were now marketed easily and sold to other banks or non-bank financial units that included the investment banks as well. Since these transactions were outside the orbit of conventional banking channels, the Fed had no regulatory power over these. Instead, these were subject to the jurisdictions of the US Securities and Exchange Commission (SEC). One witnessed, as
