When was the financial sector deregulated?

One popular meme is that the financial crisis was caused by deregulation in the banking and financial sectors. Accordingly, suggest the memists, free markets should take the blame and more government regulation is the solution.

When did this deregulation take place? One measure of the degree of regulation is how much the federal government spends to craft and enforce regulations in various sectors: consumer safety, environment, energy, homeland security, and so on. The more the government is regulating, the higher its budget should be; and the less government is regulating, the lower its budget.

Figure 2 of Regulator's Budget Rpt.xlsHere are the federal government’s budgeted spending numbers for the Finance and Banking sector of the economy (in constant 2000 dollars) from 1960 to 2009:

1960: $190 million
1970: $356 million
1980: $725 million
1990: $1.598 billion
2000: $1.965 billion
2007: $2.065 billion
2008: $2.294 billion
2009: $2.343 billion

Another measure is the number of government personnel employed in crafting and enforcing regulations. The numbers for Finance and Banking:

1960: 2,509
1970: 5,618
1980: 9,524
1990: 15,308
2000: 13,310
2007: 11,637
2008: 12,113
2009: 12,190

Other measures of degree of regulation? Conclusions?

Source: Veronique de Rugy and Melinda Warren, “Regulatory Agency Spending Reaches New Height: An Analysis of the U.S. Budget for Fiscal Years 2008 and 2009” [pdf].

Related: Deregulation? The Federal Register’s size.
What is the US economy? Introduction.

26 thoughts on “When was the financial sector deregulated?

  • December 18, 2011 at 7:51 pm

    >Oh, so when the government replaces one rule you retroactively like with another rule that you retroactively dislike, that’s DEREGULATION. Wow! I didn’t know that.

    As I typed that comment I did wonder whether someone might be stupid enough to say, “oh, the banks successfully lobbied to change the 1:12 ratio rule with a 1:40 ratio rule, sure, but that’s is still a regulation, so it doesn’t count!”. But then I thought that nobody could possibly be that stupid. I was wrong!…;-)

  • December 18, 2011 at 8:34 pm

    Unsupported (and likely false) premises: regulation is always good, the harsher the better; regulations I like are objectively better than regulations I dislike; regulations I like never result in negative unintended consequences; regulations I dislike always result from nefarious impulses of the greedy 1% and ALWAY result in negative, unintended consequences.

    A corollary: I get to make up the rules of the debate and alter the definitions of its terms upon my subjective whim before, during and even after the debate.

    “I was wrong.” On that we are in full agreement.

  • December 19, 2011 at 1:26 am

    A lot of times “deregulation” is not actually free-market mechanics at all but a newly-negotiated deal between industry and government power-brokers whereby (some) industry is favored in a way it previously wasn’t, but it could actually be handouts or turning a blind-eye to shoddy business practices rather than allowing companies the freedom to operate. one problem is that way too many people seem to take a mystical (i.e. black box) approach to understanding business and the market. The second problem is that it’s very difficult for people to conceive of a system operating efficiently without centralized control or compensation and “tweaking”.

  • December 19, 2011 at 9:01 am

    Michael, thank you for stating clearly what I was trying to say.

    Deregulation means “getting the government out.”

    Virtually all regulation is written by lobbyists anyway.

  • February 26, 2012 at 2:12 pm

    The concrete-bound, Pragmatist opposition to putting facts in context is the problem. Statists consider only the narrowest, most immediate, govt control (or lack of control) of banking, as if the wider, long-lasting, fundamental controls dont exist or are beyond criticism. Money has been socialist since, at least, the 1914 Fed founding. Banking has been virtually socialist since that time. Variations within this are basically irrelevant, despite hysterical Pragmatists intellectually paralyzed by this moment’s concrete crisis and this moment’s concrete solution. And see Richard Salsman’s _Breaking The Banks_ and _History of Money & Banking in the US_ by Murray Rothbard for long-range views. Capitalist productivity has been stronger in the long run than the govt attack on production but this may be ending.

    See Mises’ _Human Action_ on why statistics are valid for economic history but not economics. Coincidences are not causes. Man has free will.

    Trash the Fed and its counterfeiting of money and bank accounts. Free the banks. Commodity money. End fractional reserve counterfeiting (which encourages govts to counterfeit). Tar and feather Bernanke and Krugman.

    Man’s mind, not a bureaucrat’s gun, is the source of production. See _Atlas Shrugged_.

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