The Role of Regulation in the Financial System

When new regulations succeed, free marketeers and vested interests typically start to argue that such strong regulation is no longer necessary. For example, in response to the great crash of 1929, massive new regulations were enacted between 1930 and 1940. But by the 1990s, the pain of the crash was long forgotten and belief in the efficacy of the free market was riding high. The GFC in turn inspired another round of regulation.