The Advent of a New Banking System in the US

Abstract

The 1980s was one of the most eventful and consequential decades in the development of the US financial system. During this decade, the regulatory framework established in response to the Great Depression started to be dismantled. These regulatory changes were a key driving force behind the transformation of the banking sector. Moreover, the end of the decade saw the most serious banking crisis since the Great Depression. This pattern of deregulation and crises, which started in the 1980s, has continued until the present. Thus, it is worth study this period in greater detail and the consequences it has had for the US banking and financial system. The chapter argues that the deregulatory process that started in the 1980s in the banking industry in the United States has changed the profile of this sector. Between the Great Depression and the 1980s, the banking sector in the United States was a stable, yet not competitive sector. The financial deregulation of the 1980s changed this sector to a competitive, yet unstable one. This deregulatory process occurred mostly as a response to the economic conditions of the 1970s.