Financial Market Deregulation

American Banker, March 13, 1984 | Go to article overview

Financial Market Deregulation

The "Economic Report of the President," prepared by the Council of Economic Advisers, was released last month. The following is the fifth chapter in the report, "Financial Market Deregulation." The council suggests that capital requirements for financial institutions by strengthened, the deposit insurance system be tied to risk, and fractional coverage be introduced for large accounts.

Over the past few years, financial markets have undergone sweeping changes of a magnitude not seen since the 1930s. Despite these changes, the process of market restructuring and regulatory reform remains incomplete. Additional regulatory changes of historic dimensions are being debated. The shape and scope of these reforms will be important to the American economy for decades to come.

The issues in financial regulation are many and complex. They include the safety and soundness of financial institutions, the problems of dealing constructively with changing technology, and the reduction of regulatory burdens to the maximum extent possible. Similar concerns are important in other industries where regulatory reform is being debated. But the financial regulatory reform issues are in many respects far larger.

Financial regulation is not simply a matter of protecting poorly informed investors -- the usual focus of consumer protection regulation -- but of protecting everyone. In the financial crises experienced in 1933 and earlier in U.S. history, well-informed, prudent investors and depositors found themselves ruined financially.

From painful experience, we know that a failure of public policy with respect to financial markets can create damage that extends far beyond the financial services industry. Financial market failure can mean economywide failure -- recession, widespread unemployment, and bankruptcies.

The essential functions of financial regulation are to ensure the safety and soundness of the financial system and to foster efficient allocation of capital by promoting competition and limiting opportunities for fraud and self-dealing.

The competitive capital markets i the United States, long encouraged by public policy, have provided highly efficient links between the providers of funds and the users of funds, directing resources into the most productive investments in the economy. But instability concern, and at times a highly disruptive fact, throughout U.S. history. The challenge for regulatory policy is to maintain stability while realizing the benefits of competition. The Major Historical Forces

It is best to begin the analysis of the key financial regulatory issues by considering the major forces that have shaped the industry and led to the present regulatory environment. These forces have included public reaction to periods of financial instability that occurred in the 1930s and earlier, public concerns over the credit powers of financial institutions and their ties with other institutions, and strong competitive pressures coming from both within and among the various segments of the industry.

Much of our inherited regulatory structure involves extensive and far-ranging legislation enacted in response to crisis. Periods of acute financial instability have resulted in the disappearance of major institutions and the introduction of new government regulations.

For example, in the 1860s, problems of Civil War finance and increasing currency disorders led the Congress to establish the national banking system and the Office of the Comptroller of the Currency. The Congress also defined the arrangements under which national banks would issue a national currency.

Later, a series of banking panics -- periods of numerous bank failures and bank suspensions of payments -- culminating with the panic of 1907, created demands for a stronger federal mechanism to prevent instability. This led to the establishment of the Federal Reserve System in 1913. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Financial Market Deregulation


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.