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Politics : American Presidential Politics and foreign affairs
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To: DuckTapeSunroof who wrote (39542)12/14/2009 1:06:07 PM
From: TimF  Read Replies (1) of 71588
 
The regulations worked: the nation was spared major financial crises for almost four decades after World War II.

The 2nd part doesn't imply, or even strongly suggest the first. Its suggest only a possibility that the regulations worked.

I'd say what worked more was individual and "institutional memory" of what happened in the past, which faded away over time, followed by the growth of "it will be different now" thinking. I do think some of the regulations did some good, OTOH they also created costs and problems themselves.

The Savings and Loan bust, has a closer tie to "deregulation" (I put that in quotes since the regulations where changed around but remained in place, there was no laissez-faire or even a strong move towards it, as some, perhaps including Krugman, would claim). The more recent financial problems? Not so much. In fact regulation had a lot to do with causing the problem. For example the specific set up of the reserve requirements encouraged complex securitization. Its not that it allowed for, or had some loophole for such securitization, it actively gave assets held in such a way a higher value in reserves calculations. Also you have the CRA and related issues, Fannie and Freddie (not so much regulation, but certainly government intervention), etc.
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