The 1980s was the worst decade for the U.S. financial services industry since the 1930s. Recent bank and thrift failures are a product of both flaws in the way American depository institutions have been regulated and fundamental economic forces that are making it more difficult for the surviving institutions to compete. Robert Litan examines how the financial system and the government’s regulatory role are changing and outlines the move away from banks and thrifts to pension funds, finance companies, and mutual funds. He looks at several facets of this revolutionary migration: Why has it occurred? What are its implications for financial markets and the their regulators? And how, if at all, should policymakers respond?
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