During this crisis millions of people lost their jobs, homes, their savings and got into very big debts. Because it is still an enormous problem it is crucial to better understand what were the causes of this crisis? What measures UK and US have taken to reduce the impact of crisis and also what can be done to avoid similar crisis in future?.
The roots of financial crisis where everything has started can be followed back to deregulation of financial markets in Western Europe, United Kingdom and United States, which has happened from late 1970s and the beginning of 1980s. Deregulation is defined as a process when governments remove legal or quasi-legal restrictions on the groups of businesses or on prices charged in special industries. The main aim of deregulations is to make competition bigger by increasing freedom of companies within the industry (Gibson, 2003). Until late 1970s the partnership between commercial and investment banks was very limited because of different regulations. But in beginning of 1980s finance industry exploded because investment banks went public. One of the main reasons of this explosion was that US president at that time Ronald Reagan choose the former CEO of Merrill Lynch, Donald Regan as his treasury secretory (Mandel, 2004). This step really brought economic and politic powers together and was the beginning of deregulation era. In 1982 president R. Reagan approved regulation allowing savings and loan companies to make risky investments with money of their depositors. Further deregulation of financial institutions in US continued for more than 30 years under different administrations of Bill Clinton and George W. Bush (Inside Job, 2010). In 1999 Gramm Lech Bliley Act, was passed by US congress it allowed banks to merge and also authorized commercial banks to do risky investments with their depositor's money (Filson and Olfati, 2014). .
In the beginning of 1990s, deregulation and big changes in technology led to a massive use of complicated financial products in other words called derivatives.
