Views: As In the Past, Reform Will Follow Crisis

James Bullard, president of the Federal Reserve Bank of St. Louis and a non-voting member of the Federal Open Market Committee, writes in the current issue of Regional Economist that:

Historically, crises have led to significant legislation.  For example, the panic of 1907 led to the Federal Reserve Act of 1913, which established the Federal Reserve as the central bank.  Out of the Great Depression came the Glass-Steagall Act, which established the Federal Deposit Insurance Corp. and separated commercial from investment banking.  The thrift crisis in the late 1980s led to the enactment of the Federal Deposit Insurance Corp. Improvement Act (FDICIA) of 1991, which mandated prompt resolution of failing banks and new standards for bank supervision, regulation and capital requirements.

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