chapter  7
22 Pages

Banking on Change: The Partial Deregulation of the Financial Industry

WithJeffrey Worsham

The partial deregulation of the financial industry in the 1980s is a textbook example of how exogenous events, policy learning, and sustained conflict can alter subsystem-induced equilibrium. Financial deregulation was also a part of a deregulatory wave that engulfed the larger political-economic system in the late 1970s and crested in the early 1980s. The story of financial deregulation, although interesting in itself, presents a parable illustrating the dynamic of subsystem change. Deregulation swept through the US polity in the 1980s like a policy tidal wave. One set of astute observer’s likened deregulation to the latest policy fashion; all of Washington was sporting some version of it by the mid-1980s. The Senate committee in particular focused on the impact deregulation would have on mortgage markets, home starts, and consumers as mortgage borrowers. The eventual result of the House-Senate impasse was the Depository Institutions Deregulation and Monetary Control Act of 1980.