Answer to Question #42010 in Economics for LUKACROSS

Question

Why does the federal government monitor and regulate American banks and other financial institutions?

to shield money from the damaging effects of economic downturns
to keep greater control over the economy
to protect the government’s own money from fraud
to improve the standard of living

Answer 1

Financial regulation is a form of regulation orsupervision, which subjects financial institutions to certain requirements,
restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization.Financial regulation has also influenced the structure of banking sectors, by decreasing borrowing costs and increasing the variety of financial products available.

Federal government monitors and regulates American banks and other financial institutions toshield money from the damaging effects of economic downturns, so the right answer is a).