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> Well, we’re three decades into an era of systemic deregulation and financialization. The result? Not really, finance and banking are still the most regulate

> Well, we’re three decades into an era of systemic deregulation and financialization. The result? Not really, finance and banking are still the most regulated sectors on earth. Hardly deregularized.

cariss 12y ago
Yep. Its passing attempt at economic analysis seems to omit the government's fingerprints all over the latest recession.
nl 12y ago
In the US they are effectively deregulated in close to every way the actors care about (aka regulatory capture). Additionally, enforcement of the few regulations that exist is close to nonexistent. Edit: downvotes, so here's some references: On Regulatory Capture: a growing number of respected commentators now argue that regulatory capture of public agencies and public policy by leading banks was one of the main causal factors behind the financial crisis of 2007–2009.[1] OTS consistently referred to the banks it oversaw as its “constituents.” They favored asking banks to correct problems rather than enforcing regulation, even though the banks rarely followed through on the agreements.[2] On lack of enforcement: Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted.[3] [1] http://www.chathamhouse.org/sites/files/chathamhouse/public/International%20Affairs/2010/86_3baker.pdf http://www.chathamhouse.org/sites/files/chathamhouse/public/... [2] https://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_Crisis:_Anatomy_of_a_Financial_Collapse#Regulatory_Failures:_Case_Study_of_the_Office_of_Thrift_Supervision https://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_... [3] http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216 http://www.rollingstone.com/politics/news/why-isnt-wall-stre...
- nickff 12y ago
  I cannot find any hard data on the very long term trend of numbers of SEC enforcement actions, but they seem to be on the rise in the long term, though they have fluctuated greatly. From the books I've read and interviews I've heard, it seems that the opposite is true; financial sector prosecutions have become so common that it is now regarded as a 'cost of doing business' more than a stain on one's reputation. edit: the comment I responded to has been edited, and I have not yet had time to review the new citations
  - wpietri 12y ago
    I'd suggest you read Bair's "Bull by the Horns". Bair, a Bush-appointed Republican who ran the FDIC during the 2008 crisis, made it pretty clear that regulation had become ineffective in a number of important ways. The last chapter is a call for significant strengthening of US financial regulation. I'd say the "cost of doing business" thing cuts against your argument, though. I read that as the regulations (or the regulators) not being strong enough to keep bad actors in check.
    - nickff 12y ago
      You may very well be correct, but I read the 'cost of doing business' story as meaning that everyone is constantly getting prosecuted, and there is no way of escaping it, so you might as well just pay out the fine, and raise you prices, as all your competitors do. It doesn't really matter that you have to pay the fines if everyone else in your industry has to do the same, because it is not a competitive disadvantage.
  - nl 12y ago
    The SEC prosecution thing is interesting. My view is that if businesses are viewing prosecution as merely a 'cost of doing business' then it is really evidence they are pretty ineffective as both an enforcement measure and a disincentive to breaking the rules. (To make it clear, I'm not anti-market at all! I just think an effective and efficient market relies on the rule of law to function correctly)
phillmv 12y ago
A field can remain highly regulated while having certain aspects deregulated. This is what we saw before the financial crisis. For instance, the repeal of the Glass-Steagall act is credited with enabling the broad systemic risk that created Too Big To Fail - by allowing commercial banks to invest in securities and proprietary trading. http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislat... This was further compounded in Europe by loosening up leverage ratio requirements - but I don't have a link handy for that one. You're also not commenting on the second word in there - financialization. The 2008 crisis wasn't possible in the 90s, because the residential mortgage market in the US hadn't been fully securitized prior to the aughts. Anyhow, to pretend like there has been no deregulation is to be disingenuous at best.
- seehafer 12y ago
  > Anyhow, to pretend like there has been no deregulation is to be disingenuous at best. True, but then to blame a financial crisis on free markets when no such thing even remotely existed is also disingenuous at best.
- burntsushi 12y ago
  The claim put forth was that there is no systemtic deregulation, not that there is no deregulation at all.
adventured 12y ago
Net regulations on banking and finance have increased drastically over the last 20 years. Indeed, regulation over the whole economy has increased drastically. That's a fact that is easily demonstrated. The regulations are all public. The US economy is by far the most regulated economy on earth. There is no close second.

cariss 12y ago

Yep. Its passing attempt at economic analysis seems to omit the government's fingerprints all over the latest recession.

nl 12y ago

In the US they are effectively deregulated in close to every way the actors care about (aka regulatory capture). Additionally, enforcement of the few regulations that exist is close to nonexistent. Edit: downvotes, so here's some references: On Regulatory Capture: a growing number of respected commentators now argue that regulatory capture of public agencies and public policy by leading banks was one of the main causal factors behind the financial crisis of 2007–2009.[1] OTS consistently referred to the banks it oversaw as its “constituents.” They favored asking banks to correct problems rather than enforcing regulation, even though the banks rarely followed through on the agreements.[2] On lack of enforcement: Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted.[3] [1] http://www.chathamhouse.org/sites/files/chathamhouse/public/International%20Affairs/2010/86_3baker.pdf http://www.chathamhouse.org/sites/files/chathamhouse/public/... [2] https://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_Crisis:_Anatomy_of_a_Financial_Collapse#Regulatory_Failures:_Case_Study_of_the_Office_of_Thrift_Supervision https://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_... [3] http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216 http://www.rollingstone.com/politics/news/why-isnt-wall-stre...

nickff 12y ago
I cannot find any hard data on the very long term trend of numbers of SEC enforcement actions, but they seem to be on the rise in the long term, though they have fluctuated greatly. From the books I've read and interviews I've heard, it seems that the opposite is true; financial sector prosecutions have become so common that it is now regarded as a 'cost of doing business' more than a stain on one's reputation. edit: the comment I responded to has been edited, and I have not yet had time to review the new citations
- wpietri 12y ago
  I'd suggest you read Bair's "Bull by the Horns". Bair, a Bush-appointed Republican who ran the FDIC during the 2008 crisis, made it pretty clear that regulation had become ineffective in a number of important ways. The last chapter is a call for significant strengthening of US financial regulation. I'd say the "cost of doing business" thing cuts against your argument, though. I read that as the regulations (or the regulators) not being strong enough to keep bad actors in check.
  - nickff 12y ago
    You may very well be correct, but I read the 'cost of doing business' story as meaning that everyone is constantly getting prosecuted, and there is no way of escaping it, so you might as well just pay out the fine, and raise you prices, as all your competitors do. It doesn't really matter that you have to pay the fines if everyone else in your industry has to do the same, because it is not a competitive disadvantage.
- nl 12y ago
  The SEC prosecution thing is interesting. My view is that if businesses are viewing prosecution as merely a 'cost of doing business' then it is really evidence they are pretty ineffective as both an enforcement measure and a disincentive to breaking the rules. (To make it clear, I'm not anti-market at all! I just think an effective and efficient market relies on the rule of law to function correctly)

phillmv 12y ago

A field can remain highly regulated while having certain aspects deregulated. This is what we saw before the financial crisis. For instance, the repeal of the Glass-Steagall act is credited with enabling the broad systemic risk that created Too Big To Fail - by allowing commercial banks to invest in securities and proprietary trading. http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislat... This was further compounded in Europe by loosening up leverage ratio requirements - but I don't have a link handy for that one. You're also not commenting on the second word in there - financialization. The 2008 crisis wasn't possible in the 90s, because the residential mortgage market in the US hadn't been fully securitized prior to the aughts. Anyhow, to pretend like there has been no deregulation is to be disingenuous at best.

seehafer 12y ago
> Anyhow, to pretend like there has been no deregulation is to be disingenuous at best. True, but then to blame a financial crisis on free markets when no such thing even remotely existed is also disingenuous at best.
burntsushi 12y ago
The claim put forth was that there is no systemtic deregulation, not that there is no deregulation at all.

adventured 12y ago

Net regulations on banking and finance have increased drastically over the last 20 years. Indeed, regulation over the whole economy has increased drastically. That's a fact that is easily demonstrated. The regulations are all public. The US economy is by far the most regulated economy on earth. There is no close second.