Self-regulation of banks is a terrible idea
After the wave of bank failures during the first four years of the Great Depression, Congress enacted the Glass-Steagall Act to regulate the banks. The banks, of course, hated being regulated. Once most of the politicians who remembered those bank failures had retired (or died), the banks persuaded Congress in 1999 to repeal most of the provisions of Glass-Steagall. The bankers promised that they had learned their lessons and would not do anything risky again.
Eight years later, banks began failing again. In response to that, Congress enacted the Dodd-Frank Act in 2010. The bankers went to Congress in 2018 and said that they had learned their lessons, that they could be trusted and persuaded Congress to lift many of the regulations imposes by Dodd-Frank. One of those testifying was the CEO of Silicon Valley Bank, which was the first bank to recently fail.
Now, it is 2023 and banks are failing again.
Haven’t we seen this movie enough times? It is time to reimpose regulations on the bankers and then turn a deaf ear to their pleas that they can ever be trusted.