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Describe Financial Deregulation Introduced by The Reagan Administration
Describe Financial Deregulation Introduced by The Reagan Administration
By the late 1970s, a political and intellectual movement that crossed party lines had begun
to rethink the wisdom of much economic regulation. Market-oriented economists argued that
interfering with the work of the invisible hand was inefficient and bound to fail, while consumer-
oriented liberals argued that their constituents would often see lower prices and better service through
competition than they were getting through regulation.
More controversially, many Reagan Administration appointees did not distinguish between economic
and social regulation in the same way as President Reagan did—indeed, several members of his
Administration proved far more hostile to the latter than the former.
In 1982, Garn-St. Germain Depository Institutions Act was passed. This bill deregulates thrifts almost
entirely, allowing commercial lending and providing for a new account to compete with money market
mutual funds. This was a Reagan administration initiative that passed with strong bi-partisan support.
Analyze how Raegan’s wave of deregulation differed from Carter and Clinton administrations’ track
record on financial regulation.
When President Ronald Reagan took office in 1981, he issued Executive Order 12,291, giving the newly
created OIRA a gatekeeper role in reviewing draft regulations—as well as paperwork—to ensure that
their benefits exceeded their costs. Although this order was initially controversial, each subsequent
president has continued and expanded OIRA’s central regulatory oversight role, as well as the economic
principles embodied in the orders issued by Presidents Reagan and Carter.
In 1993, President William Clinton replaced Executive Order 12,291 with Executive Order 12,866, which
remains in effect today, despite the very different regulatory rhetoric of Presidents Bush, Obama, and
Trump, who succeeded him. Executive Order 12,866 retained OIRA’s review of significant new
regulations. It also reinforced the philosophy that regulations should be based on an analysis of the
benefits and costs of all available alternatives, and that agencies should select regulatory approaches
that maximize net benefits to society unless otherwise constrained by law.
U.S. President Ronald Reagan campaigned on the promise of rolling back environmental regulations. His
devotion to the economic beliefs of Milton Friedman led him to promote the deregulation of finance,
agriculture, and transportation. A series of substantial enactments were needed to work out the process
of encouraging competition in transportation. Interstate buses were addressed in 1982. Freight
forwarders (freight aggregators) got more freedoms. According to the United States Federal Maritime
Commission, in an assessment in 2001, this appears to have opened up substantial competitive activity
in ocean shipping, with beneficial economic results .