What could've stopped the Financial Crisis of 2008?


In our latest BNC session, we discussed what could've stopped the Financial Crisis. I have used the ideas from then.

We were to decide which would be best if we were to rethink the Financial Crisis, and what (out of the 3 I'm going to put below) we understood the least. We then had to explain what we thought was the defifnition of the other 2. (We did other things too, but I cannot remember them)

  • Safer lending (Public)

We thought this could, because part of the reason why the Financial Crisis of 2008 happened (I think) is that many, many people took out loans that they couldn't repay, meaning the Bank would then be short of that amount of cash. This was not a good thing, as, in early 2008 (possibly 2007), there were already signs that damage is being done, signs that meant that something bad was going to happen. This, of course, was n ot exactly the public's fault, because some might genuinely have no money, and in need of help themselves, let alone the banks.

  • Changing the way bankers get paid (Bankers or Bankers' Bosses)

This is an precaution that could've been taken. Bankers were being paid for how many loans they could give out, so we thought that they could've been paid instead for the "safer banking" I call it (as I don't know the proper name). I named it this because I thought it suited the meaning: making sure that people can almost certainly pay back the loan (taking procedures such as looking at their rent - if they're paying it, not overdue - and the same with bills. They could also look at their bank account to see how much money they have there, or simply ask them). Doing this will make sure that there will be a less risk to take, and moving a step away from the chances of another Financial Crisis.

  • Stricter rules (the Goverment)

This is the final one that we thought of as a group. I thought this would be best, as it can cover all of the others if needed. I thought this because with rules, you can change the ways bankers get paid, and the same with Safer lending example I put in the "changing the way bankers get paid" paragraph. There can be rules for all of these things, and, if needed, more. I think the only downside to this is that people ( I mean the Goverment or Bankers’ Bosses - whoever decides these rules) might over-do these rules and make too many of them that loans will be impossible to get, and trying to do anything in the bank will be a lot harder. Note that I say ‘might’ as it is only a possibility; we don't really know this will happen, do we?

What I understood the least... and the definitions.

At first, I thought “Well, I know all of them and their definitions”. I was stuck, but thanks to further thought, I decided (finally) that I understood the stricter rules the least - yes wierd, but wait for my explanation - because we don't actually know what strict rules they are talking about. That's what I thought, as they did not specify it. It could be rules about banking, or safer lending, or the bankers, or their bosses, but I didn't feel they made it clear just by saying "The goverment set stricter rules for banks". I needed it to, I say the same thing yet again, specify it and make it CLEAR!

I have given most of these definitions above, so I might be repeating myself...

I thought that Safer Lending meant that either the Public or the Bankers would do something to prevent the Public from not paying back their loans; making it, as the name states, Safer Lending. That they would do stuff such as the things I have put above: looking if the person is paying their bills and rent on time etc.

I thought that Changing the way Bankers get paid meant that they, well, change the way bankers get paid. As I have said above, I think it is totally ridiculous that - or if - they got/get paid for how many loans they give out, rather than being a safe banker and doing something I call "safer banking" in which i have explained the definition in the "Changing the way bankers get paid" paragraph.

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