"Many causes for the financial crisis have been suggested, with varying weight assigned by experts. The United States Senate issued the Levin–Coburn Report, which found "that the crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street."
Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets. The 1999 repeal of the Glass–Steagall Act of 1933 effectively removed the separation that previously existed between Wall Street investment banks and depository banks. In response to the financial crisis, both market-based and regulatory solutions have been implemented or are under consideration.
Late-2000s financial crisis - Wikipedia, the free encyclopedia
A Short History of Financial Deregulation in the United States
"1978, Marquette vs. First of Omaha – Supreme Court allows banks to export the usury
laws of their home state nationwide and sets off a competitive wave of deregulation,
resulting in the complete elimination of usury rate ceilings in South Dakota and Delaware,
1980, Depository Institutions Deregulation and Monetary Control Act – Legislation
increases deposit insurance from $40,000 to $100,000, authorizes new authority to thrift
institutions, and calls for the complete phase-out of interest rate ceilings on deposit
1982, Garn-St. Germain Depository Institutions Act – Bill deregulates thrifts almost
entirely, allowing commercial lending and providing for a new account to compete with
money market mutual funds. This was a Reagan administration initiative that passed with
strong bi-partisan support.
1987, FSLIC Insolvency – GAO declares the deposit insurance fund of the savings and
loan industry to be insolvent as a result of mounting institutional failures.
1989, Financial Institutions Reform and Recovery Act – Act abolishes the Federal Home
Loan Bank Board and FSLIC, transferring them to OTS and the FDIC, respectively. The
plan also creates the Resolution Trust Corporation to resolve failed thrifts.
1994, Riegle-Neal Interstate Banking and Branching Efficiency Act – This bill
eliminated previous restrictions on interstate banking and branching. It passed with broad bi-
1996, Fed Reinterprets Glass-Steagall – Federal Reserve reinterprets the Glass-Steagall
Act several times, eventually allowing bank holding companies to earn up to 25 percent of
their revenues in investment banking.
1998, Citicorp-Travelers Merger – Citigroup, Inc. merges a commercial bank with an
insurance company that owns an investment bank to form the world’s largest financial
1999, Gramm-Leach-Bliley Act – With support from Fed Chairman Greenspan, Treasury
Secretary Rubin and his successor Lawrence Summers, the bill repeals the Glass-Steagall Act
2000, Commodity Futures Modernization Act – Passed with support from the Clinton
Administration, including Treasury Secretary Lawrence Summers, and bi-partisan support in
Congress. The bill prevented the Commodity Futures Trading Commission from regulating
most over-the-counter derivative contracts, including credit default swaps.
2004, Voluntary Regulation – The SEC proposes a system of voluntary regulation under
the Consolidated Supervised Entities program, allowing investment banks to hold less capital
in reserve and increase leverage.
2007, Subprime Mortgage Crisis – Defaults on subprime loans send shockwaves
throughout the secondary mortgage market and the entire financial system.
December 2007, Term Auction Facility – Special liquidity facility of the Federal Reserve
lends to depository institutions. Unlike lending through the discount window, there is no
public disclosure on loans made through this facility.
March 2008, Bear Stearns Collapse – The investment bank is sold to JP Morgan Chase
with assistance from the Federal Reserve.
March 2008, Primary Dealer Facilities – Special lending facilities open the discount
window to investment banks, accepting a broad range of asset-backed securities as collateral.
July 2008, Housing and Economic Recovery Act – Provides guarantees on new
mortgages to subprime borrowers and authorizes a new federal agency, the FHFA, which
eventually places Fannie Mae and Freddie Mac into conservatorship.
September 2008, Lehman Brothers Collapse – Investment bank files for Chapter 11
October 2008, Emergency Economic Stabilization Act – Bill authorizes the Treasury to
establish the Troubled Asset Relief Program to purchase distressed mortgage-backed
securities and inject capital into the nation’s banking system. Also increases deposit
insurance from $100,000 to $250,000.
Late 2008, Money Market Liquidity Facilities – Federal Reserve facilities created to
facilitate the purchase of various money market instruments.
March 2009, Public-Private Investment Program – Treasury Secretary Timothy Geithner
introduces his plan to subsidize the purchase of toxic assets with government guarantees."