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Originally Posted by DTK
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http://en.wikipedia.org/wiki/Savings_and_loan_crisis
http://www.fdic.gov/bank/historical/s&l/
http://www.cato.org/pubs/regulation/...3-england.html
etc etc etc
Apparently the Depository Institutions Deregulation and Monetary Control Act of 1980 wasn't about deregulation. ok.
Regarding the mortgage crisis of 2008:
If the repeal of Glass-Steagall wasn't deregulation, then i'm at a loss. It removed the previous regulation which stipulated that retail banks could not get into the investment banking business. That meant they were now free to make all sorts of wild bets with depositor's money.
In 1998, the CFTC proposed to regulate the derivatives market (which it oversaw), a $50 Trillion unregulated market/casino that included things like CDO's and Credit Default Swaps . It was shot down by the Clinton administration. In 2000 Chairman of the Senate Banking Committe (and future vice-chairman of UBS, hmmm) Phil Gramm introduced and got passed a law that basically prevented any regulation of derivatives.
So sure, that wasn't deregulation. It was the prevention of any regulation.
Also, the SEC's enforcement division's ability to regulate was systematically gutted by rules changes and dramatic staff cuts. It's pretty hard to regulate with your hands tied and a skeleton staff. That to me is blatant de facto deregulation.
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Utter nonsense. I have dealt with the banking industry daily for years. I own a bank consulting group. There is NO sector of business that is more regulated than banking. Just because there is one area where there is less regulation does not wipe out the MASSIVE volumes of regulation on the other side. There is no way that the derivatives market would have gone anywhere if it wasn't for government regulation and intervention. The enforcement of CRA, which forced banks to make more risky loans, coupled with the subsequent buying of the risk by FHLMC and FNMA, sent banks into areas that normal free market risk tolerances would NEVER have allowed. Normal risk management procedures were thrown out the window when the government was there to take the normal flow of risk and profit away. AS far as Glass Steigall's repeal, the bulk of the lending was done by companies like Countrywide, Washington Mutual, Indy Mac, and the dozens of smaller specialized subprime lenders that were neither commercial banks nor investment banks. The smaller mortgage companies sold the loans they made either to FHLMC and FNMA for packaging and sale into the securities markets, as they always had done. Washington Mutual and Indy Mac kept a lot of their production in their own portfolios. The companies that packaged the securities included some commercial bank/investment bank combinations, notably Citigroup. But Goldman Sachs, Bear Stearns, Lehman Brothers and Merrill Lynch, which together accounted for most of the privately issued [non-FHLMC and FNMA] packaged loans sold as securities, were not commercial banks at all. European banks that participated, such as Barclay's, were universal banks before the repeal. AIG, which enabled some of the worst securities by writing CDSs, was neither a commercial bank nor an investment bank.
The banks that failed were either thrifts/mortgage banks without investment banks (e.g., Countrywide, Washington Mutual and Indy Mac) or investment banks without commercial banks (e.g., Bear Stearns, Lehman Brothers and almost Merrill Lynch). AIG was neither. FHLMC and FNMA were neither.
This always occurs when you mess with any organic, complex system. The same things happen when we mess with natures ecosystems, and economics, risk, and markets are just as complex.
Unfortunately when government intervention then causes these extreme boom and bust cycles, people then call for MORE intervention, (as my Corporatism graphic pointed out).
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