A Brief History of Financial Deregulation

Posted: April 7th, 2008 by: h2

If you are interested in starting to understand why the so called free market ideologues have almost no ground to stand on, read this great recent history of financial industry de-regulation. I found this one on theAutomaticEarth.com, which is doing a consistently high quality job tracking this finance stuff.

I’m not going to quote it at length, just a few choice pieces:

In 1980 the US had 4,600 thrifts, by 1988 mergers and bankruptcies left 3000. By the mid 1990’s less than 2000 survived.
Meanwhile, just a few years before the S&L crisis culminated in a massive U.S. taxpayer bailout, the deregulators, undeterred, had set their sight on a far bigger prize, the elimination of barriers between investment banks and commercial banks, as represented by the Glass-Steagall act, which was put in place as a response to the stock market crash of 1929 and the ensuing Great Depression.
Fresh off of this “victory”, incredulously, the man who was charged with being the banking systems chief regulator, Fed Chairman Alan Greenspan continued to lead the charge towards a completely unregulated financial system as he turned his sites towards championing the growth of unregulated derivatives.

And that takes us up to today.

Don’t miss this recent posting on the Market Ticker either. Too long to paraphrase, read the whole thing, and add this guy to your favorites while you’re at it, if you want to follow such things.

Freedom isn’t free and there are times when you have only days or even hours to put a stop to the institutionalization of something that will destroy your economic future along with that of your children and grandchildren.

The level of serious corruption in this sector is getting somewhat hard to stomach, as is their repeated claims that the very same ‘free market’ that has repeatedly been shown to NOT work with finance, somehow becomes good when it’s a question of deregulation.

All in all, a lot of food for thought these days. The fans of the free market somehow are silent when the government has to come in and bail them out again, which translates to socialization of risk and privatization of profit. And that, my friends, stinks to almighty heaven.

However, as Reich recently pointed out so succinctly in his book SuperCapitalism, you should never expect any socially beneficial acts to originate in the capitalist sector. They are motivated by one and only requirement, the pursuit of profit. This is called various cute terms, like ‘maximizing shareholder value’, which makes it sound all nice and friendly, but that’s just a cover for the central greed that, in Reich’s case, he could describe clearly, but was unable or unwilling to let himself identify by name.

And that’s how this merry-go-round spins today, deregulate until the markets collapse, then increase the deficit to pay the bankers and speculators’ way out of the mess. All for the good of the economy. but whose economy exactly are we talking about here? Certainly not mine, that’s for sure.

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