Why deregulation is before Congress again

Assistant professor of international relations and politics, Christopher Mitchell

By Keely Savoie

With Congress on the cusp of considering a bill that would reduce regulation on financial organizations, Mount Holyoke College’s Christopher Mitchell penned a warning in The Washington Post and discussed the cyclical danger of deregulation on National Public Radio’s Marketplace.

In Mitchell’s analysis, regulations implemented in the wake of a financial cataclysm can, in retrospect, begin to look too restrictive to small institutions, or overly onerous for big ones, leading legislators to consider rolling back the rules.

This cycle, Mitchell said, leads to the boom/bust cycle that can set the country up for another financial collapse as memories of the last one fade into the annals of history.

“In the aftermath of the financial crisis, everyone wants to take risk off the table,” he said. “Once a decade or so has gone by without crises, people start to get an appetite to add a little more risk in.”

As Congress considers repealing critical pieces of the 2010 Dodd-Frank bill, the suite of financial regulations implemented after the 2008 global financial collapse, Mitchell sounds a warning: while the set of rollbacks under consideration are not the most sweeping reforms made in recent history, such loosening of regulations to the financial sector are likely to continue until the next financial crisis.

The whole story is available in the Washington Post.