Norbert Michel ,CONTRIBUTOR
I follow the evolution and devolution of monetary and financial policy
Opinions expressed by Forbes Contributors are their own.
Why do I write so much about the myth that financial market deregulation caused the financial crisis? Because that false narrative has spread so far and wide. Even some folks who are otherwise friendly to free-markets have bought into it.
So here’s one more shot: financial markets were not deregulated in any meaningful way during the last 100 years.
It is true that federal regulators changed many rules and regulations over the century, but the notion that the new rules amounted to a lack of rules is dead wrong. Federal regulators have increasingly told banks and non-bank financial firms what they can do and how they can do it.
Last week, when discussing this topic, my friend Mark Calabria mentioned some evidence I had missed: Todd Conover’s Congressional testimony in the 1980s.
Conover was the head of the Office of the Comptroller of the Currency (OCC) from 1981 to 1985, and his 1984 testimony (all 655 pages) is available on the St. Louis Federal Reserve Bank’s website. The testimony is yet another piece of evidence that banks were not deregulated.
But it also serves as evidence that Dodd-Frank and the new Basel III capital rules’ emphasis on so-called macro-prudential regulation is not as new as regulators would like us to believe.
As they tell the story, the new regulations will make markets safer because now, finally, regulators will focus onsystem-wide safety (a macro-view) as opposed to focusing only on the safety of individual banks.
https://www.forbes.com/sites/norbertmichel/2015/08/10/the-financial-deregulation-that-never-was/
