The reforms were aimed at improving lending standards, restricting trading practices and strengthening capital requirements. Better loan standards and less trading have kept banks away from the reckless practices that precipitated the crash, while more capital helps to ensure that the banks can absorb any losses that may occur.
A more stable financial system and greater protection against economically ruinous booms and busts have resulted.
But these vital measures are all under attack by the Trump administration and the Republican-controlled Congress. The stated rationale, expressed most recently in a report by the Treasury Department, is that regulation has impeded bank lending and, by extension, economic growth.
That’s wrong. Bank lending has expanded at a decent pace in recent years; economic growth has suffered largely from Congress’s failure to provide fiscal support. What the banks and their enablers in the administration and Congress want is a return to the days when excessive risk-taking led to outsize profits. They want to turn back the clock by rolling back the rules.
History tells us that things won’t end well if that happens. Deregulation led to the financial crash in 2008. It’s safe to assume that repeating the mistake will lead to the same result.
