Industry Repeats Itself

Hysteria Over Financial Reforms, Then and Now

By Taylor Lincoln

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Introduction 

Bankers and business leaders described the reforms following the financial meltdown in foreboding language, such as“monstrous systems” imposing an “impossible degree of regulation” that would “cripple” the economy and set the countryon a course toward socialism.

Many of the chieftains’ complaints centered on matters affecting their own industries, but they portrayed regular Americans as the true victims because, they said, new laws and regulations were halting the flow of capital, grinding the nation’s job creation engine to a halt.

Although readers could be forgiven for assuming that these complaints refer to the debate over the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the claims above are all about 75 years old.

The “monstrous” reforms of yesteryear created the Federal Deposit Insurance Corporation and the Securities and Exchange Commission, and required publicly traded companies to disclose their earnings and other material information. Today, these institutions and requirements are bedrocks of our financial system.

In retrospect, the business community’s wildly inaccurate forecasts over the New Deal reforms should serve as data points in evaluating whether the ominous predictions surrounding recent financial reforms should be taken seriously or dismissed as mere special interest hyperbole.