Wasting A Crisis: Why Securities Regulation Fails

Paperback | November 11, 2016

byPaul G. Mahoney

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The recent financial crisis led to sweeping reforms that inspired countless references to the financial reforms of the New Deal. Comparable to the reforms of the New Deal in both scope and scale, the 2,300-page Dodd-Frank Act of 2010—the main regulatory reform package introduced in the United States—also shared with New Deal reforms the assumption that the underlying cause of the crisis was misbehavior by securities market participants, exacerbated by lax regulatory oversight.

With Wasting a Crisis, Paul G. Mahoney offers persuasive research to show that this now almost universally accepted narrative of market failure—broadly similar across financial crises—is formulated by political actors hoping to deflect blame from prior policy errors. Drawing on a cache of data, from congressional investigations, litigation, regulatory reports, and filings to stock quotes from the 1920s and ’30s, Mahoney moves beyond the received wisdom about the financial reforms of the New Deal, showing that lax regulation was not a substantial cause of the financial problems of the Great Depression. As new regulations were formed around this narrative of market failure, not only were the majority largely ineffective, they were also often counterproductive, consolidating market share in the hands of leading financial firms. An overview of twenty-first-century securities reforms from the same analytic perspective, including Dodd-Frank and the Sarbanes-Oxley Act of 2002, shows a similar pattern and suggests that they too may offer little benefit to investors and some measurable harm.

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The recent financial crisis led to sweeping reforms that inspired countless references to the financial reforms of the New Deal. Comparable to the reforms of the New Deal in both scope and scale, the 2,300-page Dodd-Frank Act of 2010—the main regulatory reform package introduced in the United States—also shared with New Deal reforms th...

Paul G. Mahoney is a David and Mary Harrison Distinguished Professor of Law at the University of Virginia School of Law.  

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Format:PaperbackDimensions:208 pages, 9 × 6 × 0.7 inPublished:November 11, 2016Publisher:University of Chicago PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:022642099X

ISBN - 13:9780226420998

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Extra Content

Table of Contents

Acknowledgments
Introduction
Chapter 1. Long before the New Deal
Chapter 2. The Blue Sky Laws: A Tale of Progressives and Interest Groups
Chapter 3. What the Securities Act Got Right
Chapter 4. What the Securities Act Got Wrong
Chapter 5. Did the SEC Improve Disclosure Practices?
Chapter 6. Was Market Manipulation Common in the Pre-SEC Era?
Chapter 7. Regulation of Specific Industries
Chapter 8. The Old Is New Again: Securities Reform in the Twenty-First Century
Appendix A
Appendix B
Notes
Bibliography
Index

Editorial Reviews

“For the past twenty years, Mahoney has cheerfully punctured the conventional wisdom about corporate and financial regulation. Ranging as far back as the 1696 crisis in England and as close up as the aftermath of the Great Recession, but training his eye most carefully on the New Deal era, Mahoney shows in Wasting a Crisis that the reforms enacted after a crisis are nearly always hasty and are usually designed to deflect blame from governmental officials’ precrisis missteps. Wasting a Crisis is both erudite and readable, supported with clever empirical analysis and full of counterintuitive insights into the political process. It is a classic of economic history, a superb book by a superb scholar."