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The Journey from Deregulation to Regulation

In: Business and Management

Submitted By fdk511
Words 3982
Pages 16
The Journey From Deregulation to Regulation - Are We Walking In Circles?
Executive Summary
This paper attempts to explore the cycle from deregulation to regulation against the backdrop of events from 2001 to 2008, with some reference to later laws such as Dodd-Frank. The context is against the quote from Aristotle that “law is order, and good law is good order”.
A Brief history of Deregulation:
Regulations have been considered a blessing and a curse since time immemorial. It could be argued, especially with those of a theological mindset, that religions introduced the first forms of regulations. The penalty for deviations were well laid out, and often times had precedent, but exceptions were always sought and loopholes were often explored.
Modern economics, regardless of which school of thought is followed, can be compared to a religion1. There are tenets, or commandments. There are different religions, from Keynes, to Marx to Milton. Without extending this analogy, it is relevant to point out that economic theories either rely on governments to participate wholeheartedly in the state of economic affairs by regulating businesses, corporations and industries, or to let the system weed out the weaker in favor of the stronger.
In the United States, bitter past experience shaped the regulations surrounding businesses. The Great Depression was the first indicator that the system needed to be made more robust, which in turn led to regulations that formed the base of what our current system looks like today2. The Glass-Steagall Act (GSA) was designed to separate investment and commercial banking activities3. The Act had many detractors, with many claiming it to be an over-reaction to the financial crisis in the 1930s. It was repealed in 1999 with the establishment of the Financial Modernization Act (also known as the Gramm-Leach-Bliley Act), which “repealed all

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