I personally think that Austrians have been weak or not as assertive enough in counteracting the claim that deregulation caused the financial depression. We always point to the FED and its money printing as the fundamental cause of the business cycle, and while that is true, the fact is that we circumvent the issue of regulation, as marginal as it may be. The MSM does not talk about the FED or monetary policy but talks about CDOs, derivatives, Glass Steagall Act and such. While these are peripheral issues, I believe they must be directly tackled nonetheless. I’ve read one article by Frank Shostak entitled ‘Does it make sense to ressurect Glass Steagall?’ in which he does exactly this. He argues that if Glass Steagall had not been repealed then the bank lending volume would be restricted and that would be good, because bank lending in a fractional reserve banking system is harmful. That is also why Murray Rothbard did not support banking DEregulation in the financial sector, at least those that amplify the effects of monetary inflation. Read the article if you don’t believe me!
However, there are also financial regulations that create moral hazard and uncertainty. It has been argued by Art Carden in 'a mises media gem entitled ‘Short Selling: Explanation and Defense’ that financial regulation is similar to the drug war. We have meth today because the state banned crack a decade ago, we had crack a decade ago because the state banned cocaine a 2 decades ago, and then it was heroine before that and so on.
Having said that, I’d like this thread to be a compilation of empirical evidence of financial regulations throughout history. Let this be a something we can refer a statist to whenever we debate with them. Note also that I am not denying the validity of ABCT as a satisfactory theory in explaining the business cycle. I just want to smash statist arguments in the hardest way I can.
The below quote is my humble contribution to this thread.
“Given the broad scope of government intervention in the U.S. home mortgage sector through the GSEs, the maze of other agencies—such as the Department of Housing and Urban Development (HUD), the Federal Housing Finance Board (FHFB), the Federal Housing Administration (FHA), the Federal Home Loan Bank (FHLB), and the Office of Federal Housing Enterprise Oversight (OFHEO)—and the cascade of Congressional acts—such as the Fair Housing Act (1968), the Equal Credit Opportunity Act (1974), the Community Reinvestment Act (1977), the Home Mortgage Disclosure Act (1975), the National Affordable Housing Act (1990), the Community Development and Regulatory Improvement Act (1994), the Home Ownership and Equity Protection Act (1994), and the American Dream Down Payment Act (2003)—it is simply ludicrous for anyone today to speak of the U.S. mortgage sector as having been a fully “free” market before the latest crisis. Only more ludicrous is the claim that the few free elements still remaining, but not the interventions, caused the crisis. Armed with its allegedly “noble” goal of increasing home ownership for the needy, the U.S. government has riddled the mortgage market with perverse incentives and unjust interventions that either compel or induce banks to lend to less-than-creditworthy borrowers, and thus to put themselves at greater risk of insolvency.”