The main purpose of financial regulation is to make more information available for market participants, and hence protect investors from adverse selection, reduce the asymmetry of information, and ensure the soundness of financial intermediaries. To protect the public and the economy from financial panics, the government of the United Republic of Tanzania implement six types of regulations: restrictions on the entry of financial intermediaries, stringent reporting requirements for financial intermediaries, restrictions on assets and activities of financial intermediaries, insurance of peoples deposits by the government if the financial intermediary should fail, limitations on competition among financial intermediaries, and restrictions on interest rates that can be paid on deposits by financial intermediaries. Yet, these financial intermediaries play a crucial role in an economic crisisthey are responsible for both causing the market to crash and then helping it recover from the crisis.

Required:

Discuss how economic crises manifest at the level of financial intermediaries.