Deregulation of the financial sector
Last Updated: 10/04/82
Recent changes in financial markets have been sweeping: NOW accounts, failures of large banks and thrift institutions, creation of money market mutual funds, Merrill Lynch's cash management account, American Express's acquisition of Shearson, Sears' acquisition of Dean Witter, and interstate mergers of savings and loan associations. Two primary driving forces behind the recent innovations are the unexpected and abrupt increases in the level and volatility of interest rates and the major technological improvements in the transmission, processing, and storage of information. The impact of interest rate volatility and technology on the financial system was much more dramatic and severe than it otherwise might have been because of a third factor—the existence of a pervasive system of regulations that limited and distorted the responses of existing financial institutions and contributed to the emergence of new institutions.