E.

Action Plan

Year 1790s is when financial revolution of young United States strives fresh from the
wreck from war and starting to build its banking system. But when the panic of 1792 occurred, it
affected the country's banking system as well as its financial stability. Insider trading is the main
cause of this event, with William Duer performing these unethical doings. In the midst of the
financial crisis, the first U.S. Treasury Secretary executed his financial creativity to minimize loss
and provide solutions to various issues that occurred at that time. With his fast action, together
with other government agencies, the United States was able to surpass such challenges and
the financial crisis and is now one of the leading first-world countries with busting financial
stability.

Strengthening the implementation of policies related to the monitoring of banking and

financial market activities should be taken seriously. Banking and financial market activities can
be crucial to a country’s economic status. In order to maintain a robust execution of policies,
certain desirable institutions must act and carry out their tasks and obligations. A nation's ability
to prosper economically depends on having trustworthy market players and platforms. Every
potential danger or issue should be removed or minimized as a result.

Step 1: Conduct monitoring measures led by the government and the central bank to
identify the risks that would threaten the stability of the system.

To begin the process of developing an effective policy, it is crucial and necessary to

monitor the condition of the financial system. This process will be led by the government and the
central bank, because it would be best if the change will be set in motion at the highest level of
governing organizations and then disseminated to its institutions.

In this step, all aspects related to the systems must be looked into. Specific areas will be
further discussed to provide more detail on the aspects that need to be checked, tracked, and
analyzed that will help identify the potential threats. The referred areas are as follows:

a. Government – The government's financial activities need to be closely watched since

what it does reflects the state of the economy. The measures that they are implementing
are based on the situation it is going through, and this will determine whether it is in a
good or bad state.
b. National Bank – One of Alexander Hamilton’s ambitious ideas was to create a national
bank. And later in 1791, the Bank of the United States (BUS) was established. The
 national bank did not solely act as a bank. The BUS performed important activities for
the government, it collects tax, secures government funds, making loans for the
government, etc. It basically acted as a fiscal agent of the government. Aside from this, it
also acted as a commercial bank. This being the case, BUS and its activities must be
monitored.

c. Bank Activities – Banks are one of the financial institutions that are accessible to the
public. With this, they are a major player in the financial system and their activities can
influence the market value to increase or decrease.
d. Financial Market Movement – Market prices fluctuate in response to supply and
demand. It would be surprising if pricing suddenly changed, therefore, it is important to
keep an eye on this to determine the reason behind the sudden price change.

Through this process, potential problems will be identified before they become critical.
Moreover, existing problems can be addressed. Starting the action plan with monitoring
measures is strategic as this will be a key to a viable, relevant, and effective policy
implementation.

Step 2: Tailor a policy that would accurately target the problem of the major market
participants which are the government and financial institutions.

The next step after monitoring and identifying the threats is tailoring a policy. The policy
that will soon be implemented must be designed solely for the problems and potential threats
that was discovered in the first step. Unnecessary measures should be mitigated to achieve an
on-point and focused policy that will accurately target the issues that need to be solved and
improved.

In the case of the United States’ financial panic in 1792, problems were encountered by
the major market participants. One of the problems encountered was the overexpansion of
credit creation by the BUS that resulted to a downturn in market value. Another major problem
was the chaos caused by William Duer and his so-called “company”, that leads to a negative
multiplier effect on the finances of the United States that almost bankrupts the nation. These
problems are just some of countless issues that can be encountered by the market participants
un a financial crisis.

Tailored policies that will answer to the issues in 1792 panic are the following:

a. Creation of a Central Regulatory Authority

 The objective of this policy is to establish a regulatory body, or a central bank, that would
be responsible for overseeing the activities of financial institutions. Having a central
monetary authority is ideal for any nation to as this will promote an organized and stable
financial system.

b. Mitigation of Excessive Debt Ramification

This policy includes the standard regulation of banks in terms of limitations on the
extension of debt. Emerging banks should consider the level of their deposits before
extending debts among their clients. The Central Bank will be the one to monitor and
ensure stability. In addition to this, banks shall be compelled to practice regular review of
Financial Statements to better guard their liquidity for both short and long term.

c. Controlling of Credit Activities Using Interest Rates

This policy will be practiced by the central bank. As a central regulatory authority, they
have the power to influence credit activities by controlling the interest rates. To do this,
monetary policies—which are measures taken to manage the supply of money
circulating in an economy—are enforced. In the case of having an overexpansion of
credit creation, increasing of interest rates can be employed under the contractionary
monetary policy to decrease credit activities.

d. Creation of Formal Loan Contracts

To make sure that both parties are informed of the terms and conditions of the debt, this
policy strives to establish a formal and official evidence of the debt. The contract must
specify details of the loan such as the payment terms, interest rates, duration of the loan,
collateral, etc.

These policies that will be implemented to address the issues are straightforward. The
strategy is accurate, precise, and mapped out from the problem itself. It is not replicated from
policies of a successful financial system. The government, together with the central bank will be
making policies that are made specifically to address the issue at hand.

Step 3: Publicize the clearly defined policies, procedures, goals, and objectives.

Institutions may prevent total chaos in their operations by having policies and
procedures in place. It is essential to daily operations since it establishes the norm for
acceptable and ethical behavior in the workplace as well as how one should conduct
themselves in professional settings. The Central Bank acts as one central department that is
responsible for monetary policy. All bank and financial institution adheres to the guidelines and
rules set out by the Central Bank. The central bank raises interest rates to slow the economy
when inflation occurs. Because it raises the cost of borrowing money, it reduces the high
inflation. Also, given the high costs, individuals will be less likely to spend money on products
and services, which will slow down the flow of money throughout the economy and lower
inflation.

The accomplishment of institutional goals and objectives is also impacted by the

existence of processes and goals. Hamilton enforced a policy making the Bank of the United
States, Central bank to provide short-term loans to member institutions through open-market
purchases after predicting the financial crisis and wanting to have liquidity injections as a goal.
The aforementioned policy satisfies Hamilton's objectives.

Publicize the policies and procedure can be done by having manual accessible by all
affected parties involved. Making it readily available helps disseminate the information. New
policies that are provided truly beneficial and effective should perhaps be good if they are
signed as a bill and best if signed as a law. Surely there is no such thing as a perfect policy in
one go; mistakes and hiccups can be found while processing such policies and procedures. In
pursuit of expansion, the Bank of the United States offered credits; as a result, both its monetary
obligations and its discounts are increasing. The BUS's early credit expansion was
overwhelming. Hamilton proposes a process to advise all banks to constrain credit creation and
contract their discount in response to this.

A post-implementation assessment of policies is necessary, thus signing the law should

be the final step. All concerned entities and institutions will benefit from having clearly defined
goals, objectives, policies, and procedures by providing order and guide on how a person or
institution acts, this also contribute to a successful implementation. Having outdated or
incomplete policies and procedures is a waste of everyone's effort. Regularly reviewing it should
be done in order to minimize future mistakes and problems. While reviewing it, one should take
other elements into account when updating policies and procedures, such as technology, new
regulations, and structural changes.

Step 4: Training government and financial institutions to practice the new policies.
 The highest level of governing organizations such as the government and the central
bank should be coordinated with the institutions to conduct trainings that would provide
guidance and supervision to their employees. Aside from trainings, regular team meetings will
also be helpful to constantly remind the employees of the importance and purpose of the new
policies that will be implemented.

As the famous line goes, “Your employees are the backbone of your company”, the
actions of the employees of an organization will always reflect to the output of their work. If the
employees are neglectful, the result of their work would be unsound and imprecise. Conversely,
if the employees are disciplined, the output would be a good quality of work. This being said, it
is evident that the importance of employee compliance and adaptation to new policies is crucial.

Step 5: Implementation of the policy.

Implementation of the policy is a crucial part of achieving goals and success. Policies
won’t work if the process stops at enactment. Implementing a policy does not ensure success
by itself. As a result, there are additional strategies, such as implementation enablers, to raise
the possibility of accomplishing policy aims and objectives. Like leadership, which is evident
from the very beginning of policymaking all the way through execution. Leadership is required to
implement new policies since it imposes authority and has the ability to change mandates,
structures, and other things. similar to how Hamilton inspired the early United States' financial
revolution. From the early beginning of the revolution, when Hamilton created the BUS to fund
the re-establishment of public debt, through the time when the panic of 1792 ends.
Communication, which is crucial to the effective implementation of policies, is another
implementation enabler. Similar to leadership, communication is present throughout the whole
implementation process. As it communicates information and offers feedback on how the
implementation is going, systematic communication may be beneficial to all of its involved
organizations or entities.

Institutions and organizations that are involved in implementing policies into practice are
necessary, as are the roles and duties that they play.

Government - Being the highest authority on law, the government establishes important
economic policies that direct the institutions it affects to adhere to the rules. Government-
enacted rules like these support financial stability and prevent the nation's economy from
experiencing a catastrophe. The young United States established its own central bank,
 calling it BUS, when Washington signed the legislation into law in February 1791. With this,
people voluntarily exchanged out their old treasury debt for new ones. Integrating the BUS is
another means to encourage the recovery of the national debt, which will help the new Bank
of America succeed after a protracted war. The government will start enhancing and
implementing fresh regulations for the supervision of banking and financial market
operations. The government would be the first to improve existing policies and introduce
new ones pertaining to the supervision of banking and financial market operations.
Punishment and policy are directly related, as well. This gives the government the ability to
penalize those who violate specific laws.

Central Bank – The nation's central authority, the Central Bank, is in charge of monetary
policy. The central bank normally follows the government in its implementation. Moreover, it
guarantees that regulated firms are managed safely and prudently. The financial system and
stability of a nation are affected by the monetary policies implemented. All concerned
organizations or entities should implement all policies and procedures proposed by the
central banks. The central bank adheres to tight policy implementation due to its substantial
obligations. As disobeying the central bank's policies might jeopardize the nation's financial
and economic stability, they are strictly prohibited by law.

Banks and Financial Institution -The central bank is in charge of overseeing this sector,
hence all government and central bank rules must be properly adhered to. An important step
in the implementation process is adhering to the policies that have been provided. To
preserve their exposure to risks and hazards such as insolvency risk, banks, on the other
hand, also create their own sets of policies.

Certain policies are made to address certain issues. Implementing such policies and
monitoring and enforcing them as needed is one way to increase the likelihood of achieving the
policies goals and objectives.

Step 6: Government should conduct policy evaluation and post-implementation reviews.

Policy evaluations are an essential part of the policy cycle. It examines the degree of
efficacy of certain implemented policies. In addition, it identified areas that need work. To
guarantee policy accountability and offer evidence-based policy formulation and execution, the
government should perform policy evaluation. Reviews conducted after policies have been put
into operation also evaluate their inputs, results, efficacy, and efficiency. Hamilton continues to
conduct evaluations and post-implementation reviews after the BUS is incorporated. In doing
so, he received reports on the BUS's efficiency, efficacy in sustaining public debt, and other
areas that need improvement, such as the creation of credit and getting adequate specie
reserves.

Governments and the central bank can monitor the development of implemented policies
and ensure that they are still in accordance with their aims and objectives by conducting post-
implementation reviews and policy evaluations. Moreover, knowing if financial and physical
resources are distributed effectively. Having evaluation and post-implementation evaluations
has additional benefits, including feedback mechanisms. This can be utilized to arrange or
resolve any other implementation issues. Also, by providing feedback on the efficacy of such
measures, this might help the affected institutions. 

Back in 1790s, all six essential components of modern financial system: Effective public
finances and debt management, stable monetary unit, central bank, banking system, securities
markets, more accessible chartering provisions for business corporation are widely practiced by
bank institutions. As long as the banking sector continues to apply the aforementioned crucial
elements of a contemporary financial system, good policy implementation and post-
implementation assessments will be evident. When exploring further options for a better used
and efficient contemporary financial system that took into account additional elements like
technology issues, which are extremely important in the present.
References:

Following policies and procedures, and why it’s important. (2020).

https://www.powerdms.com/policy-learning-center/following-policies-and-procedures-and-why-
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%20streamline%20internal%20processes

Policy Implementation. (n.d.).

https://www.cdc.gov/policy/polaris/policyprocess/implementation/index.html?fbclid=IwAR03G-
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The lines between policy development and implementation are blurred. (n.d.).
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Weekes, J. (2017). Step-by-Step: How to implement effective policies and procedures.

https://healthandsafetyhandbook.com.au/bulletin/step-by-step-how-to-implement-effective-
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