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Über dieses Buch

When we start to perceive that there is a problem in the market (such as monopoly, fraud or speculation), the legislature passes a law to correct it, a bureaucracy is created to interpret and enforce the new law, firms and other market participants comply, and the problem is solved. But is it? Are politicians’ promises and textbooks’ stories to be believed?

This book examines US economic history to demonstrate how the applications of laws are uncertain, affected by changing political and economic conditions as well as by legislators’ perceptions and the ability or willingness of bureaucracies to enforce laws. The two cases developed in this book revolve around William McChesney Martin, Jr., who helped apply (i) the 1930s Securities Acts as president of the New York Stock Exchange and (ii) the Federal Reserve Act in the Keynesian era unforeseen by that Act. As chairman of the New York Stock Exchange, Martin served as private regulator of firms listed on the Exchange—itself a publicly regulated entity. As chairman of the Federal Reserve, he then served as a public regulator. This book thus offers an innovative approach to understanding and examining the various issues and incentives facing each of the three parties: regulated, private regulator, and public regulator.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
Market problems such as monopoly, fraud, speculation, and/or manipulation are perceived, the legislature passes a law to correct them, a bureaucracy is assigned to interpret and enforce the law, buyers and sellers comply, and the problems are solved. Or are they? Are the promises of politicians and the stories of textbooks believable? This book examines the public and government reactions, and the effectiveness of those reactions, to two famous sets of crises: the securities collapses of the Great Depression and the bank panics of the late nineteenth and early twentieth centuries, culminating in 1907.
John H. Wood

Chapter 2. The Securities Act of 1933

Abstract
The Great Depression of 1929–33 saw large losses in aggregate production, prices, income, and security values, which politicians and the press attributed to financial fraud arising from greed which called for the legal enforcement of transparency. Or were securities firms already transparent and well-behaved, the asset collapses having been caused by business losses? The New Deal was convinced of the former, but its legislative ambitions were modified by private interests, and its regulations have not been fully applied.
John H. Wood

Chapter 3. Bureaucracies

Abstract
German sociologist Max Weber argued that because of their expertise and constant presence, bureaucracies were or could be the chief force in government, a position supported by reformers and progressive politicians who believed that technological advances required more sophisticated government administrations. It was questionable, however, whether expertise and efficiency in government and the political process have been, or could be, improved. The conflict between administrative and traditional judicial processes is still active, along with the political complications of regulation.
John H. Wood

Chapter 4. The NYSE and the SEC

Abstract
The New Deal believed the Securities and Exchange Commission was needed to regulate stock exchanges and enforce the Securities Act in order to limit the public’s risk exposure. Because of the agency’s lack of expertise regarding finance, and for political accommodation, however, it decided (or was forced) to restrict its actions to the oversight of self-regulation, with mixed effects. The financial industry, particularly William McChesney Martin, Jr., at the New York Stock Exchange sought with considerable success to limit the reforms desired by the new bureaucracy.
John H. Wood

Chapter 5. Central Banking in the United States

Abstract
American money and banking have been determined within changing legal frameworks—such as the Banks of the United States, the Independent Treasury, and the Federal Reserve—determined primarily by legislation, the effects of which have been controversial and often unsatisfactory as measured by instability and inflation. The most significant constants have been the desires for more regulation (mainly to offset the effects of previous regulations) and the use of the banking system, assisted by government agencies, to monetize government debt.
John H. Wood

Chapter 6. Chairman of the Fed

Abstract
The Federal Reserve was created to promote stability and growth by means of an elastic currency, a task at which it failed miserably during the Great Depression, but which inspired the additional tasks of assisting employment and price stability. Martin’s term as chairman of the Federal Reserve Board and the Federal Open Market Committee (1951–70) was characterized by conflicts between his desire for stable prices, bolstered by his skepticism regarding the stimulative effects of inflation, and Keynesian and administration desires for the Fed’s financing of government deficits.
John H. Wood

Chapter 7. So Who Governs?

Abstract
Much has been made of the so-called transformative securities legislation of the New Deal and the new and unique American central bank of 1913, but in regard to the questions raised in Chap. 1, it may be doubted that they in fact brought significant changes. The financial markets have made use of the new technologies but most of their participants and underlying processes have continued, and an important function of the banking system has continued to be the monetization of the government debt.
John H. Wood

Backmatter

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