ABSTRACT
The origins of the 2008 financial crisis can be traced to various milestones in the construction of the post-World War II American economy. During the 1950s, Keynesianism became orthodox at the same time as momentum built to rescind sundry New Deal and wartime restrictions on free enterprise, including wage-price controls, and fair trade retail pricing (Miller–Tydings Act 1937; McGuire Act 1952, both rescinded in 1975 by the Consumer Goods Price Act). Deregulation in rail, truck, and air transportation during the 1970s, ocean transport in the 1980s, natural gas and petroleum sectors 1970–2000, and telecommunications in the 1990s created opportunities for asset value speculation, soon facilitated by complementary deregulation initiatives in the financial sector. The Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), and Garn–St. Germain Depository Institutions Act (1982) both increased the scope of permissible bank services, fostered mergers, facilitated collusive pricing, and relaxed accounting rules (Moody’s for example is permitted to accept fees from insurers it rates). Beginning in the early 1990s banks shifted from the direct loan business to packaging and marketing novel debt instruments like mortgage-backed securities (ultimately including subprime loans) to other financial institutions; shortly thereafter President William Jefferson Clinton approved the Gramm–Leach–Bliley Act (1999) enhancing business flexibility. The Glass– Steagall Act 1933 (Banking Act of 1933) had compartmentalized banks, prohibiting those engaged in stable businesses like mortgages and consumer loans from participating in riskier stock brokerage, insurance, commercial, and industrial activities with the intention of building a firewall against speculative contagion. The repeal of provisions banning holding companies from owning other financial companies ushered in an era of financial merger mania across old divisional lines, allowing companies like Citicorp and Travelers Group to unite.
