We now have a textbook example of the dangers to society due to deregulating a critical industry such as banking. How do you think bank deregulation is working so far? Thomas Jefferson (Third President of the United States) did his best to warn us over 200 years ago when he proclaimed that “Banking establishments are more dangerous than standing armies.”
The Great Depression showed us the risks and problems created when banks are running out of control. The banking industry was clearly recognized as a group with too much self interest to ever let them regulate themselves. Legislation was passed in 1933 that fixed the biggest banking regulatory problems. All of this careful planning was unraveled when Glass-Steagall was eliminated in 1999.
It only took the banks eight years to demonstrate why they indeed need significant government oversight to prevent them from wrecking worldwide economies and destroying trillions of dollars in investment value. Of course, bankers have a different view, and in their minds they did nothing wrong and were victimized by circumstances beyond their control.
The guiding motivation behind government deregulation is that companies do not like being regulated by governmental agencies. The prevailing viewpoint among many businesses is that nobody knows better than they do about how to run their company. Among those favoring deregulating any and all business enterprises, the basic position is that big government is responsible for everything that is wrong with America.
On the other hand, the underlying purpose of the federal government from the moment it was founded was to take responsibility for the "common good" because financial interests often run into a lot of trouble reconciling their own interests with those of their customers. Banking might be the worst possible industry to deregulate, but that is what happened when the Glass-Steagall Act was abolished 15 years ago.
Perhaps author and banking expert William K. Black said it best with the title of his book:
- “The Best Way to Rob a Bank Is to Own One”