Did Deregulation Cause the Financial Crisis?
by Mark A. Calabria Mark A. Calabria is Director of Financial Regulation Studies at the Cato Institute. The growing narrative in Washington is that a decades-long unraveling of the regulatory system allowed and encouraged Wall Street to excess, resulting in the current financial crisis. Left unchallenged, this narrative will likely form the basis of any financial reform measures. Having such measures built on a flawed foundation will only ensure that future financial crises are more frequent and severe. Rolling Back the Regulatory State? Although it is the quality and substance of regulation that has to be the center of any debate regarding regulation’s role in the financial crisis, a direct measure of regulation is the budgetary dollars and staffing levels of the financial regulatory agencies. In a Mercatus Center study, Veronique de Rugy and Melinda Warren found that outlays for banking and financial regulation increased from only $190 million in 1960 to $1.9 billion in 2000 and to m
