rickyp wrote:FateAnd, "deregulated?" Bull. It was barely regulated. Something would have to be "regulated" BEFORE it could be "deregulated." We were very much more of a libertarian society then.
Barely regulated before or after FDR.
Here's what FDR did.
https://en.wikipedia.org/wiki/1933_Banking_Act
Here's what caused the financial collapse in 2008. It starts with repealing much of FDR's work.
In the case of the US, we can point to a number of important acts of financial deregulation that were the direct causes of the crisis:
(1) Repeal of the Glass-Steagall Act (1999)
In the US, the Glass-Steagall Act, initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities. This led to segregation of investment banks from commercial banks. Glass-Steagall was effectively repealed for many large financial institutions by the Gramm-Leach-Bliley Act in 1999.
Joseph Stigliz has argued that
“The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns” (Stiglitz 2009).
Deposit insurance does make sense when it protects a commercial banking sector prevented from making highly speculative and risky investments.
(2) Hiding Liabilities on Off-Balance Sheet Accounting
Banks used off-balance sheet operations called special purpose entities (SPEs) or special purpose vehicles (SPVs) to take on toxic asset-backed securities. This allowed banks to escape even the weak regulation of Basel I and II. It is estimated that the top 4 U.S. depository banks put around $5.2 trillion into SIVs.
(3) Commodities Futures Modernization Act (CFMA), 2000
This exempted financial derivatives, including credit default swaps, from regulation.
(4) The SEC’s Voluntary Regulation Regime for Investment Banks, 2004-2008
The SEC's Consolidated Supervised Entity (CSE) regime was introduced in 2004. It allowed investment banks to engage in their own net capital requirements in accordance with the standards of the Basel Committee on Banking Supervision. It was voluntarily administered, and the result was that investment banks pushed borrowing ratios to as high as 40 to 1, as in the case of Merrill Lynch.
One major confirmation of the effectiveness of financial regulation is the state of Canada’s banking system. In 2008, the World Economic Forum ranked Canada's banking system as the soundest in the world. The US system was ranked at number 40, and Germany and Britain ranked 39 and 44. Canada’s banks required no direct government bailouts.
Some commentators blame Basel I and II as a major cause of the financial collapse.
But if Basel I and II led inevitably to asset bubbles and financial collapse, then why has this not occurred in Canada?
The answer is fairly simple: Canada, unlike many other Western countries, still has tight and effective banking regulation.
http://socialdemocracy21stcentury.blogs ... in-of.html
Hey pally, Hoover was BEFORE FDR. Any post-Hoover regulation is not pertinent to what Hoover did.