Date of Submission

Spring 2012

Academic Program

Economics

Project Advisor 1

Olivier Giovannoni

Abstract/Artist's Statement

Banking regulation in the United States is a complicated beast. The financial system has evolved dramatically since the founding of the country and regulation of the industry has changed just as much. Regulation exists because banking is central to a capitalist economy, but also because of imperfections in the banking industry, such as information or cartel behavior. It is difficult to balance regulation so that it accomplishes its intended goal without suffocating the industry and causing harmful inefficiencies. Regulation is meant to keep the financial system stable, but there have been, and will continue to be, devastating crashes. This is partly systemic, but prudent and insightful regulation will be effective at mitigating crises. This senior project is divided into three sections. First, I will explore the foundation of the current financial system by examining a detailed history of the American banking industry since its establishment with the First National Bank in 1791. Looking at the past allows us to more accurately understand the current situation. Next, I will closely examine three of the most dramatic banking crises in the past century: the Great Depression, the Savings and Loan Crisis, and the Crash of 2008. By closely understanding the causes of these collapses, I will determine the unifying factor that connects these large downturns. Finally, through international comparisons with Canada, China, and the United Kingdom as well as the geoclassical perspective on banking crises, I will suggest some solutions which could help mitigate the damage of the boom-bust behavior that has plagued the economy.

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