You can trace the deregulation process in financial markets as far back as 1986 after so called ‘big bang’. London capital markets prior to ‘big bang’ were non competitive in the increasingly global market. Restrictions and fail safe mechanisms trusted for centuries were swept away in the manic pursuit of profit.
It’s interesting to note that the few European countries that did not take part in this deregulation to the same extent have since suffered least.
In the US fundamental and pragmatic banking regulations, which arose from the devastating financial collapses of the Great Depression, for decades strengthened U.S. banks and capital markets, making them the twin engines of American growth and the envy of the world. They were gradually removed in the decades after ‘big bang’ and finally abolished altogether by the Securities and Exchange commission in 2004.
I maintain that these moves contributed in principal to the eventual debacle we are mired in right now. A new breed of investment banker was born that lacked the traditional caution and restraint of history. Institutions such as pensions funds and insurance companies needed to produce ever increasing returns from investment to satisfy their own shareholders.
The growth this new order created over decades was truly astonishing yet it was in reality nothing more than a giant Ponsi scheme doomed to eventual collapse.