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Some Public Policy Issues Raised By The Deregulation Of Financial Institutions

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  • JAMES L PIERCE

Abstract

Successful deregulation of financial institutions promotes flexibility and effeciency while avoiding the instabilities and abuses that characterized the financial system prior to the reform legislation of the 1930s. It is essential that deregulation nut undermine the efficacy of deposit insurance. The growth of money market funds has already resulted in a shift from insured to uninsured accounts. With deregulation there will be much larger shifts of funds to uninsured transactios accounts. In a deregulated world, it is essential that insurance be extended to cover transactions accounts, no matter who issues them, The paper also asserts that existing statutes are inadequate to deal with the conflicts of interest and anti‐competitive practices that are likely to occur with deregulation. Safeguards should be established before deregulation goes any further. Finally, it is argued that in a deregulated environment, most forms of money will pay interest, and required reserves will disappear. While these developments will not destroy the efficacy of monetary policy, they will affect it. Little work has been done an the issue of monetary policy in a deregulated world. The paper discusses existing studies and suggests some topics for future research.

Suggested Citation

  • James L Pierce, 1983. "Some Public Policy Issues Raised By The Deregulation Of Financial Institutions," Contemporary Economic Policy, Western Economic Association International, vol. 1(2), pages 33-48, January.
  • Handle: RePEc:bla:coecpo:v:1:y:1983:i:2:p:33-48
    DOI: 10.1111/j.1465-7287.1983.tb00754.x
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    References listed on IDEAS

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    1. Tobin, James, 1982. "Money and Finance in the Macroeconomic Process," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(2), pages 171-204, May.
    2. Baltensperger, Ernst, 1982. "Reserve Requirements and Economic Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(2), pages 205-215, May.
    3. Wood, John H., 1981. "Financial intermediaries and monetary control : An example," Journal of Monetary Economics, Elsevier, vol. 8(2), pages 145-163.
    4. Santomero, Anthony M & Siegel, Jeremy J, 1981. "Bank Regulation and Macro-Economic Stability," American Economic Review, American Economic Association, vol. 71(1), pages 39-53, March.
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