Dodd-Frank Act As A Result Of The 2008 Financial Crisis

Xiaoyan Zhu
WR 150 L5
04/01/2016
Paper 3 first draft
Introduction
The most vital lesson the public can learn from previous financial crisis is what caused it. This is always an unforgettable question although the Dodd-Frank Act, known as DFA, has been signed into law. If the right causes cannot be attributed to the financial crisis, it is certain that one after another crisis will come up in the near future. There are several narratives. One of them will be accepted by most people in the end, and this one will determine the interpretation of financial crisis, thus affects the government policies in the future. Major crisis especially the recent financial crisis, normally end up by the public in terms of some simple narratives. However,

The Dow Jones Industrial Average plunged down, triggering panic in financial markets, and the subsequent recession happened late eighties in the 20 centuries. Dow Jones Industrial Average tumbled 508.32 within a day. It was said the decline within 6.5 hours led to a loss of $500 billion, which was equivalent to 1/8 of the annual America’s Gross Domestic Product. The market crash shocked the whole world and the domino effect influenced the world stock markets including London, Frankfurt, Tokyo, Sydney, Hong Kong and Singapore stock market. Finally, more and more people got to know the fact, what the narrative said about Great Moderation, in fact, Great Moderation was not

Thailand’s economy was developing rapidly in 1990s, and one characteristics of a high-speed development was the need of large-scale capital. Normally, the market had two choices. One was introduction of foreign capital. The other was expansion of domestic credit. Thailand chose the first one. Opening capital account hastily without proper regulations. A crisis was inevitable. All kinds of hot money flowed into Thailand, pushing the stock market, raising the price of land and real estate, which bubbles came out. Since the beginning of 1997, the Thai baht was attacked by international speculators. In the end, Thailand had to give up the fixed exchange rate system, causing the baht plunged. Then currencies of Philippines, Malaysia and Indonesia, the three countries also plunged. Devaluations also affected the stock market in a tragedy way. After that, the international speculators used the same method in Hong Kong, Fortunately, the Hong Kong government saved the market by stabling the Hong Kong currency and persuading the major institutions not to sell Hong Kong currency or not to lend hot money to securities. At the same time, China government in the mainland also promised to provide support to Hong Kong. Whatever it takes to save the Hong Kong currency, which helped the Hong Kong to rebuilt the confidence. In order to save the Asian financial crisis, the International Monetary Fund (IMF) also played an important role in this