Market Watch: Regulation of the Stock Market

1666 Words4 Pages
bulb-icon

Recommended: The WorldCom scandal

Market Watch: Regulation of the Stock Market The Enrons and Worldcoms made it clear that the financial markets cannot be left under the auspices of corporate directors and officers, without oversight authority. "The corporate abuses and fraud that Enron exemplified, while not a first in the financial markets, they were certainly a first in terms of the magnitude of the losses to stockholders and the confidence the public reposed in the financial sector (Bequai 2003)." As a result of the stock market crash of 1929 regulations such as the Securities Act of 1933 and Securities Exchange Act of 1934 were established to prevent such practices as those that contributed to the downfalls of Enron and Worldcom. In this report, I will briefly explore some popular reasons why the market crash of 1929 happened, events leading the market crash and regulations the government instituted in order to protect investors. The 1920's, after the end of World War I, was considered a time of prosperity and technology with innovations such as the car and radio ushered in the . The economy was strong and millionaires were being created daily. But soon this economical bubble was about to burst. Like the markets of the 1990's, the Dow Jones Industrial Average rose to tremendously heights. Many investors quickly purchased shares of stocks in the hopes of making loads of money. Stocks were seen as extremely safe by most economists, due to the powerful economic boom. Investors purchased stock on margin. For every dollar invested, a margin user would borrow 9 dollars worth of stock. Because of this leverage, if a stock went up 1%, the investor would make 10%! This also works the other way around, exaggerating even minor losses.

Show More
Related

  • Jim Braddock and The Great Depression

    694 Words  | 2 Pages

    The stock market crash of 1929 is one of the main causes of the Great Depression. Before the stock market crash many people bought on margin, which caused the stock market to become very unbalanced, which led to the crash. Many people had invested heavily in the stock market during the 1920’s. All of these people who invested in the stock market lost all the money they had, since they relied on the stock market so much. The stock market crash also played a more physiological role in causing the Great depression. More businesses became aware of the difficulties, which caused businesses to not expand and start new projects. This caused job insecurity and uncertainty in incomes for employees. The crash was also used as a symbol of the changing times. The crash lead the American peop...

    Read More

  • The Great Depression in "Cinderella Man"

    1586 Words  | 4 Pages

    The stock market crash of 1929 is the primary event that led to the collapse of stability in the nation and ultimately paved the road to the Great Depression. The crash was a wide range of causes that varied throughout the prosperous times of the 1920’s. There were consumers buying on margin, too much faith in businesses and government, and most felt there were large expansions in the stock market. Because of all these...

    Read More

  • American History: Boom to Bust: 1920-1929

    903 Words  | 2 Pages

    The twenties were a time of economic boom, but this boom would end in a crash. It was a good time to be an American, but it only lasted so long. The stock market crash was a blow to the American economy that would not easily be healed.

    Read More

  • Fsa Photography During the Great Depression

    936 Words  | 2 Pages

    The 1920s were a time of leisure and carelessness. The Great War had ended in 1918 and everyone was eager to return to some semblance of normalcy. The end of the war and the horrors and atrocities that it resulted in now faced millions of people. Easily obtainable credit and rapidly rising stock prices prompted many to invest, resulting in big payoffs and newfound wealth for many. However, overproduction and inflated stock prices increased by corrupt industrialists culminat...

    Read More

  • Babylon Revisited

    406 Words  | 1 Pages

    The 1920s were a time of leisure and carelessness. The Great War had ended in 1918 and everyone was eager to return to some semblance of normalcy. The end of the war and the horrors and atrocities that it resulted in now faced millions of people. This caused a backlash against traditional values and morals as people began to denounce the complex for a return to simplicity and minimalism. Easily obtainable credit and rapidly rising stock prices prompted many to invest, resulting in big payoffs and newfound wealth for many. However, overproduction and inflated stock prices increased by corrupt industrialists culminated until the inevitable collapse of the stock market in 1929.

    Read More

  • The Reality Of The 1920's

    1231 Words  | 3 Pages

    The 1920's was a time of change in the United States. “The Roaring Twenties” had an outstanding impact on the economy, social standards and everyday life. It was a time for positive results in the consumer goods industry and American families, because of higher wages, shorter working hours, and manufacturing was up 60% in consumer goods. But it was also a time of adversity and opposition for others, such as immigrants and farmers. Immigrants had lots of competition when they were looking for work and they weren't treated fairly by Americans, depending on where they came from and what they believed.

    Read More

  • 1929 Stock Market Crash

    1392 Words  | 3 Pages

    On Tuesday, October 29th, 1929, the crash began. (1929…) Within the first few hours, the price fell so far as to wipe out all gains that had been made the entire previous year. (1929…) This day the Dow Jones Average would close at 230. (1929…) Between October 29th, and November 13 over 30 billion dollars disappeared from the American economy. (1929…) It took nearly 25 years for many of the stocks to recover. (1929…)

    Read More

  • Causes and Impact of the 1929 Great Depression

    1137 Words  | 3 Pages

    After the crash of 1929 there was a gradual but slow improvement in the market as mentioned before. But that was just temporary. No one could guess that the year 1932 would bring such a huge crash again. The crash of 1932 was so huge that the crash of 1929 seemed really petty in front of it. There was 50% depreciation even from the lowest point of 1929. The drop was so massive that it just dissolved every bit of profit that the stock market ever had. Analysts said that for the stock market to gain that peak, which it had in September 1929, it would take almost 30

    Read More

  • The Great Depression

    944 Words  | 2 Pages

    Post the era of World War I, of all the countries it was only USA which was in win win situation. Both during and post war times, US economy has seen a boom in their income with massive trade between Europe and Germany. As a result, the 1920’s turned out to be a prosperous decade for Americans and this led to birth of mass investments in stock markets. With increased income after the war, a lot of investors purchased stocks on margins and with US Stock Exchange going manifold from 1921 to 1929, investors earned hefty returns during this time epriod which created a stock market bubble in USA. However, in order to stop increasing prices of Stock, the Federal Reserve raised the interest rate sof loanabel funds which depressed the interest sensitive spending in many industries and as a result a record fall in stocks of these companies were seen and ultimately the stock bubble was finally burst. The fall was so dramatic that stock prices were even below the margins which investors had deposited with their brokers. As a reuslt, not only investor but even the brokerage firms went insolvent. Withing 2 days of 15-16 th October, Dow Jones fell by 33% and the event was referred to Great Crash of 1929. Thus with investors going insolvent, a major shock was seen in American aggregate demand. Consumer Purchase of durable goods and business investment fell sharply after the stock market crash. As a result, businesses experienced stock piling of their inventories and real output fell rapidly in 1929 and throughout 1930 in United States.

    Read More

  • Main Causes Of The Great Depression

    1292 Words  | 3 Pages

    Before the great depression started, so many people said they couldn’t pay the banks back, which caused the banks to close down. During the late 1920’s American consumers were buying less, prices were rising and Americans were overbuying on credit which were to blame, problems with the economy emerged. Many American people were engaged in speculation- they were buying bonds, and also stocks hoping to make a quick profit. Americans were buying “on margin”- which is paying a small percentage of a stock’s price using it as a down payment and borrowing the rest of the money. A lot of Americans put all of their saved money into the stock market. On the month of September the stock market had some unusual movements increasing then decreasing, but on black Tuesday October 29, 1929, the stock market crashed. Lots of people lost all of their money. M...

    Read More

  • Only Yesterday Sparknotes

    1073 Words  | 3 Pages

    So basically, the 1920's or “Roaring Twenties” was a time of major change for America as a nation. Just following the Great War America was on the fast track to new times. There was the model t car, the stock market boom and crash, the banning of alcohol, the radio, jazz music, women seeking independence, Americans seeking higher education, union strikes, the red scare, the death of President Harding and many more. Many people say this was an enjoyable time of constant dancing and entertainment galore, while others would say that the hardships of racism and poverty made this time period one of struggle and hardships. While others only remember the 1920's as the creation of mickey mouse or babe Ruth. This decade truly was “The Roaring Twenties”.

    Read More

  • Roaring Twenties And The Great Gatsby

    942 Words  | 2 Pages

    The 1920s in America, known as the "Roaring Twenties", was a time of celebration after a devastating war. It was a period of time in America characterised by prosperity and optimism. There was a general feeling of discontinuity associated with modernity and a break with traditions.

    Read More

  • Inventions of the 1920s

    508 Words  | 2 Pages

    Through out the 1920’s many inventions were created that altered human civilization. Transportation was successfully mastered. Radio communication was becoming more common and medicine was saving more and more lives every day.

    Read More

  • The Causes Of The Great Depression

    1180 Words  | 3 Pages

    The 1920s were a period of economic growth and change. Real wages for most workers increased while stock prices increased as much as they had in the previous three decades; for the first time, 2,500, the majority of Americans lived in cities and towns. The appearance of current medicine permitted child mortality rates to decline significantly among the rich, but fewer other Americans appreciated regular admission to physicians.

    Read More

  • The Securities And Exchange Commission

    537 Words  | 2 Pages

    During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2

    Read More

More about Market Watch: Regulation of the Stock Market

Open Document