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80 Years of Financial (de)Regulation in the U.S.

80 YEARS OF FINANCIAL (DEJREGULATION IN THE U.S. With the elections drawing nigh, the topic of financial regulation will have many people's blood boiling. Since the Great Depression in 1929, the U.S. has experienced an assortment of financial catastrophes and victories. It's how the nation has responded to these events with financial regulation and deregulation that has caused a division in the masses. But two things are for sure, with such global influence, the stakes are high for the U.S., and the events over the last 80 years have shaped the financial regulation landscape into what it is today. Read on to see how the process has taken place. FINANCIAL SECTOR MOST AFFECTED BY REGULATION Secondary Mortgage Markets Securities and Futures Accounting and Auditing Banking Insurance Notable World Events FINANCIAL REGULATION TIMELINE 1925 1932: The Federal Home Loan Bank Act 1933: Securities Act 1929-1941: The Great The Securities Act is the first major piece of federal legislation dealing with the sale of securities. Prior to this legislation, the sale of securities was mostly governed at a state level. This act is passed to ensure more transparency in businesses so investors can make informed decisions about investments, and to establish laws against fraud in the market. The Federal Home Loan Bank Board (FHLBB) is created Depression to monitor the Federal Home Loan Bank System. October 1929: The Wall 1930 Street Crash of 1929 The dramatic stock market 1933: The Glass-Steagall Act of 1933 crash of 1929 leads to a The Federal Deposit Insurance Corporation (FDIC) is global depression that lasted created to guarantee the safety of deposits made by until WWII. In response to the consumers to member banks. • Commercial and investment banks are separated. • Deposit coverage is set at $2,500. 1934: The Securities Exchange Act financial catastrophe, the U.S. 1935 passed a variety of bills to • Congress passes the Securities Exchange Act, establishing the Securities and Exchange Commission (SEC) to regulate the issuance, purchase, and sale of securities. • This act requires the registration of any securities raise accounting standards, and ultimately increase the 1934: The National Housing Act ПЛ public's faith in the financial sector. The Federal Savings and Loan Insurance Corporation (FSLIC) is established, which insures deposits in savings and loans institutions and also regulates the S&L industry. 1939 - WWII begins. listed on stock exchanges (IPO), the disclosure of financial statements, proxy solicitations, and margin and audit requirements. 1940 O 1941: The Great Depression ends. The Cold War begins. 1934: The Federal Credit Union Act Congress passes the Federal Credit Union Act, which establishes the Bureau of Federal Credit Unions (BFCU) to insure and regulate member-owned credit cooperatives. 1935: Deposit coverage is raised to $5,000. 1945 1945: WWII ends. 1940: Investment Advisors Act As fiduciary services grow, the need for transparency and qualifications also increases. This act requires federally regulated advisors to register with the SEC and abide by the laws included within the Investment Advisors Act. 1936: The Commodity Exchange Act The Commodity Exchange Commission (CEC) is born out of the Grain Futures Administration, requiring all commodities futures and options to be traded on organized exchanges. 1950 1945: The McCarran-Ferguson Act 1944: Bretton Woods Agreement States are given authority to regulate interstate The Bretton Woods Agreement establishes a system to manage global exchange rates, introducing an adjustable pegged foreign exchange rate. • The International Monetary Fund (IMF) and the 1955 insurance transactions. 1950: Deposit coverage is raised to $10,000. International Bank for Reconstruction and Development (IBRD) are born out of the agreement. 1960 1966: Deposit coverage is raised to $15,000. 1955: The Vietnam War 1970: Amendments Made to the Federal Credit Union Act begins. The National Credit Union Administration (NCUA) is 1969: Deposit coverage is raised to $20,000. born out of the BFCU. 1965 1971: Nixon Shock 1974: Congress Amends the Commodities Exchange Act Nixon ends the direct convertibility of the dollar to gold, ending the Bretton Woods System. The Commodity Futures Trading Commission (CFTC) is created to succeed the GFA, the division of the Department of Agriculture that supervised commodity exchanges, as 1974: The Home Mortgage Disclosure Act well as the CEC, which was established in 1936. The CFTC 1970 The HMDA is implemented to ensure that depository has the "authority to regulate futures trading in all goods, articles, services, rights, and interests traded for future delivery." institutions are reinvesting in their communities. 1974: The Employment Retirement Income Security Act 1974: Deposit coverage is raised to $40,000. 1975 1975: The Vietnam War The ERISA is created to aid and protect retired workers, requiring retirement plans to disclose information to their participants, provide a system allowing participants to file grievances and appeals, ends. 1980: Deposit coverage is raised to $100,000. 1989: The Financial Institutions and set minimum standards. Reform, Recovery and Enforcement Act 1980 • FIRREA is passed in response to the savings and 1992: The Federal Housing Enterprises Financial Safety and Soundness Act loans crisis of the 1980s. It is meant to restore confidence to the public. The Office of Thrift Supervision (OTS) is created to supervise savings and loan associations. • The FSLIC is succeeded by the Savings Associations Insurance Fund (SAIF). • The FHLBB is replaced by the Federal Housing Finance Board (FHFB). The Office of Federal Housing Enterprise Oversight (OFHEO) is established to ensure the financial safety and soundness and capital adequacy of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). 1985 1991: The Federal Deposit Insurance Corporation Improvement Act 1996: The National Securities Market Improvement Act The FDICIA reforms rules for bank regulators, aiming to implement principles of prompt corrective action and 1990 1991: The Cold War ends. Amendments are made to U.S. Federal securities laws resolution at “leastcosť" minimum cost. to promote efficiency and capital formation in the financial markets, as well as promote better management of mutual funds, while protecting investors and providing more effective regulation between states and the Federal government. 1995: Too Big to Fail The FDICIA addresses the doctrine of "too big to fail." O 1995: The dot-com bubble begins. 1995 Although the FDIC is prohibited from protecting "uninsured depositors or creditors at a failed bank if it would result in an increased loss to the deposit insurance fund," exceptions can be made for institutions that are considered "too big to fail." Of 2000: Commodity Futures Modernization Act • Largely an act of de-regulation, it clarifies regulatory jurisdictions between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) over various financial instruments, including derivatives such as credit default swaps. • Off-market trading is permitted and will remain largely unregulated. course, it was agreed that the "too big to fail" policy would likely never be used. 2000: The dot-com bubble bursts. 2000 1999: The Gramm-Leach-Bliley Act Restrictions are eliminated on banks, securities, firms, and insurance companies affiliating with each other. • Financial institutions may now be overseen by multiple regulating agencies. 2005 2002: The Sarbanes-Oxley Act 2008: Deposit coverage is raised to $250,000. In response to large-scale corporate scandals and bankruptcies such as Enron, Worldcom, Xerox, and others, SOX is implemented to establish the Public Company Accounting Oversight Board (PCAOB) in order to create accountability and enforce existing laws within the corporate sector. 2008: The global financial crisis begins. 2010: The Dodd-Frank Wall Street 2010 Reform and Consumer Protection Act In response to the global financial meltdown that began in 2008, Dodd-Frank includes a variety of unrelated regulations that essentially restructure the entire regulatory system, including: A 2008: Housing and Economic Recovery Act • Most derivatives deregulated under the Commodity Futures Modernization Act of 2000 are re-regulated under the Volcker Rule. • Bankruptcy laws are overhauled. • Many bailout cases are disallowed. • The OTS is eliminated. • The Financial Stability Oversight Council (FSOC) is established, The Federal Housing Finance Agency (FHFA) is 2015 established and the FHFB and OFHEO are dissolved. As the U.S. economy moves through the turmoil of the ongoing financial crisis, one thing is for sure: people disagree on how to address the nation's economic problems. Many call for more regulation, while others believe that the market should be free of oversight. Do you think the U.S. has made the right moves in the past? SOURCES: NBER.ORG • SECHISTORICAL.ORG • FDIC.GOV • INVESTOPEDIA.COM

80 Years of Financial (de)Regulation in the U.S.

shared by ColumnFive on Nov 12
Since the Great Depression in 1929, the U.S. has experienced an assortment of financial catastrophes and victories. How the nation has responded to these events has shaped the financial regulation lan...



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