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The New Deal, set up an elaborate array of controls by the federal gov’t over the financial system! Even on the verge of the 2008 crisis, few believed that a collapse of the entire system was possible. Dodd-Frank, by placing unregulated new markets under government supervision & by requiring big banks to behave less riskily, reversed the swing of the pendulum. There are lots of places to chip away at Dodd-Frank, until the changes add up to systemic risk. The most significant threat to the safeguards of Dodd-Frank would be to sharply lower the amount of capital that the biggest banks are required to hold in reserve. Doing so would make them—and the financial system as a whole—far more vulnerable in a moment of panic, when everybody wants to withdraw assets in a hurry. Such a move wouldn’t require congressional approval, just the assent of several agencies. And it could happen soon!
At www.newyorker.com
