Preventing the NEXT economic meltdown – or not


The Obama administration is rolling out its regulatory reform proposals, and the verdict is that they are underwhelming. That’s alarming, because regulatory failure allowed the financial and banking crimes that caused the current recession/depression. Except that there were no crimes – because laws, regulation and enforcement, from anti-trust to Glass-Steagall had been rolled back or repealed by Republican and Democratic administrations willing to do anything that business asked.

After the 1929 stock market crash and the ensuing Great Depression, the government established the Securities and Exchange Commission to regulate the stock market, the FDIC to insure bank deposits and regulate the banking industry, and the Glass-Steagall act to separate commercial banks and investment banking.

In recent years, many government regulations have been eased or eliminated — not only on financial institutions but also on airlines, telephone services, broadcasters, and more. The 1999 gutting of the New Deal-era Glass-Steagall regulation of the banking industry is a commonly-cited example. The Commodities Futures Modernization Act of 2000 is another: it essentially removed federal regulation of derivatives and credit default swaps and pre-empted state regulation at the same time.

You’d think that the current meltdown provided enough warning to inspire new regulatory zeal. Not so. For perspectives on the watered-down reform plan, here and here. If you haven’t bookmarked
Baseline Scenario
yet, it’s worth doing so – they offer smart, clear analysis. For a much more optimistic spin, go to the Washington Post.

News with attitude, mostly from MN but with occasional forays abroad.News Day summarizes, links to, and comments on reports from news media around the world, with particular attention to Minnesota news.