Capital Investment Decisions Assignment Example | Topics and Well Written Essays - 1500 words

Capital Investment Decisions - Assignment ExampleThe stated aim of this recently introduced enactment is to promote the financial stability of the United States by improving accountability and transp arency in the financial system, to end too big to fail, to comfort the Ameri bottomland taxpayer by ending bailouts, to protect consumers from abuse financial services practices, and for other purposes (GPO, n. d.). Even though this Act was passed with intent to protect the nation from other financial crisis, it adversely affects banks ability to extend financial assistance to various craft sectors. This legislation noticeably reduces banks loaning limits. For instance, the Act strictly requires banks not to lend money to risky projects or business organizations that are less likely to repay debts. Often, it cannot be possible to accurately evaluate the potentiality of capital projects or business acquisitions because those ventures depend on a set of uncertain prospective events. According to the American Bankers Association (2012), this Act has limited price thresholds for certain bring segments and framed new disclosure forms and procedures for all types of mortgages. As a result, large business corporations would face potential challenges in meeting business expansion necessitate timely. Another disappointing feature of this Act according to the American Bankers Association (2012) is that it has mandated many stronger legal liabilities in connection with real estate finance. Although these policy changes are effective to ensure the accountability and transparency of banking transactions, business houses often find it difficult to raise adequate funds to finance capital projects and acquisitions. Consequently, entrepreneurs and other business organizations would hesitate to undertake new business development ventures and this situation would adversely affect the growth rate of the US economy as a whole. The Forbes generator Lenzner (2012) argues that th e Dodd-Frank Act is a confused, bloated law because this policy change has failed to address many concerns including cost, efficiency, and growth. 2. No economic policy can assure 100 percent that it can prevent a financial crisis in the future. In contrast, economic policies or legislative amendments are introduced to lessen the chances of economic downturns or to reduce the impacts of a future financial crisis. The Act implies that the US economy has to make some regulatory changes in order to forecast and respond to the next crisis effectively. Hence, the Dodd-Frank Act itself says that it would not stock-purchase warrant the prevention of a future financial crisis. The US policymakers hold the view that Americas largest financial firms represent some of the major(ip) huge pillars financial backing the US economy. They point out that damages to these pillars during the 2008 global financial crisis worsened the economic status of the nation. It is identified that the increased g overnmental support persuaded these big companies to adopt cheaply and to take greater risks. In short, the too big to fail status of those large financial companies can be considered as a major factor contributed to the recent recession. According to Will Melick, the Gensemer Professor of Economics (as cited in Kenyon College Alumni Bulletin (2012), the Dodd-Frank Act contains provisions for certain restrictions on financial firms operational activities in exchange for the protection from