Local Regulation

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From the course by Yale University

Financial Markets

1393 оценки

Yale University

Financial Markets

1393 оценки

An overview of the ideas, methods, and institutions that permit human society to manage risks and foster enterprise. Emphasis on financially-savvy leadership skills. Description of practices today and analysis of prospects for the future. Introduction to risk management and behavioral finance principles to understand the real-world functioning of securities, insurance, and banking industries. The ultimate goal of this course is using such industries effectively and towards a better society.

From the lesson

Module 4

Take a look into the recent past, exploring recessions, bubbles, the mortgage crisis, and regulation.

Regulation Overview7:07

Salon - Regulation and housing10:42

Within Firm Regulation, part 15:28

Within Firm Regulation, part 27:59

Trade Groups4:15

Local Regulation3:34

National Regulation, part 113:13

National Regulation, part 215:05

National Regulation, part 311:34

International Regulation6:37

Meet the Instructors

Robert Shiller
Sterling Professor of Economics at Yale University
Economics

I'll focus mainly on the United States.

So the United States started out as a confederation of individual states.

And financial regulation was mostly local, but

I'm calling a state, a local government.

We had two banks of the United States.

One created in the 1790s called the Bank of the United States.

It was a central bank of sorts but it didn't conduct monetary policy.

But it expired, according to the original legislation, after 20 years and they

renewed it in 1816 with what was called the Second Bank of the United States,

which also had a 20 year charter and it expired in 1836.

And after that there was really no central government regulation

of financial activities.

Until the National Banking Act of 1863 under President Lincoln

during the Civil War, which created a system of national banks that

were regulated by the federal government instead of the state government.

So a lot of cities then started setting up, starting right after the legislation,

with national banks that had a national bank charter, so

they weren't regulated by the local state government.

And some of them listed their name as First National Bank of whatever city,

meaning they were created right after the act.

But even so, then still most of the regulation was in the state governments.

The big change came in 1934 when the federal

government set up the Securities and Exchange Commission.

At this point the securities law passed substantially

to the central government, there has been a trend towards centralization.

However, corporate law is still held by the state governments.

It was partly inspired by the observation that there was

a lot of shenanigans being played in the financial sector.

Louis Brandeis wrote a book called Other People's Money in 1914 that argued for

more regulation of financial activities.

Before the Securities and Exchange Commission there was some expansion of

regulation in what was called the progressive era in the United States.

That was the first 20 years or so of the 20th century, and

a lot of states created what were called Blue Sky Laws,

which were laws regulating tricks and deception in financial markets.

There was a lot of fraud and deception in the 1920s

brought on perhaps by the telephone, which made it possible for

people to make cold calls with financial deals offered to the general public.

They could easily get away,

because the person never met the person on the other side of the phone call.

The blue sky laws, the first one was in Kansas in 1911.

And it became a model for other states.

They virtually all establish blue sky laws, which typically

required the registration and regulated the offering and sale of securities.

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