It’s a common refrain on the Left that deregulation caused the 2008 financial crisis.
This view “is completely erroneous,” Heritage’s Norbert Michel writes in a new report.
This myth “has only allowed Congress to further expand regulators’ authority to micromanage financial companies’ activities, and Americans are not better off because of it.
In fact, regulations have only increased over the last century. Many of the laws cited as decreasing regulations actually increased government micromanagement of financial firms.
This ever-expanding regulation hasn’t actually solved the problems they set out to address, Michel argues. “Financial regulators have increasingly micromanaged financial firms’ activities despite the fact that this approach has repeatedly failed to prevent financial market instability.”
In a separate report, Michel debunks liberal misconceptions about the Glass-Steagall Act. This New Deal-era banking regulation (which was modified in the late 1990s) aimed to separate commercial and investment banking. This was supposed to address a fundamental cause of the Depression, even though “the combination actually strengthened banks.”
What do you think? Will more government regulation of the financial industry benefit consumers and protect the economy?