ABSTRACT
This chapter begins with a historical review of three sequential but layered regimes: the National Banking regime that began with the Civil War and evolved in the next several decades; the New Deal regime that was forged in response to the Great Depression and extended through the immediate postwar decades; and the deregulatory regime that emerged in response to inflation and disintermediation in the 1970s. The financial collapse of 2007-8 is often presented as a story of excessive deregulation. The story of financial regulation has a strong dose of path dependency and drift—the failure, under conditions of polarization, to recalibrate policy and institutions to reflect the challenges posed by changes in the larger environment. One of the great concerns that emerged in the years leading up to the financial crisis was that consumers were being tempted to assume levels of indebtedness that were unsustainable, and often on terms that left them vulnerable.
