Economic Crises and Financial Regulation Throughout the History of the United States

Open Access
Author:
Mumenthaler, Rachel-paige
Area of Honors:
International Politics
Degree:
Bachelor of Arts
Document Type:
Thesis
Thesis Supervisors:
  • Robert Packer, Thesis Supervisor
  • Gretchen Casper, Honors Advisor
Keywords:
  • International Political Economy
  • Economics
  • Financial Regulation
  • Economic Crises
  • 2007 Financial Crisis
  • Campaign Finance
Abstract:
It is necessary to ask why the restrictiveness of financial regulation varies throughout the history of the United States of America. This paper will seek to analyze through an interest group model approach how systemic economic shocks change the opportunity/threat environment of the financial services industry and the public to ultimately influence the American government in passing financial deregulation and regulation. After analyzing three relevant time periods—the Stock Market Crash of 1929 which led to the Great Depression and subsequent passage of the Glass-Steagall Act, the deregulatory trend starting in the late 1970s and cumulating in the late 1990s with the passage of the Gramm-Leach-Bliley Act, and the 2007 financial crisis, Great Recession, and subsequent passage of the Dodd Frank Wall Street Reform and Consumer Protection Act—and collecting campaign finance data, a number of conclusions can be made. First, the financial services industry continuously advocates for looser restrictions on higher risk/reward activities, leading toward deregulation or the weakening of existing pieces of legislations. Second, only in times of economic crises does the public become temporarily mobilized to counteract the influence of the financial industry to push for financial regulation and ultimately pass financial regulation. Third, even though there may be changes in terms of legislation, the gains that are made by consumers through their passed legislation may be lost in terms of regulatory enforcement due to the fact that the financial industry continues to lobby both regulators and legislators.