Question

Financial markets are the most heavily regulated markets in the US. Why is this?

Answer 1

The importance of interest rates and the availability and stability of money on society's economic health was realized in the 18th century (maybe earlier) along with the powers of government to influence finance and money value (inflation or deflation). Add the fact that government is the largest lender on the financial markets and you know that when the financial sector gets messed up, government and government officials have the most to gain or lose.

The role of the government in banking was a major issue as soon as the Constitution was ratified (Alexander Hamilton had strong opinions) as well as the U.S. Throughout the 19th century, Congress and the Parliament of Great Britain tried numerous measures, some caused harm, some corrected harm caused earlier, some promoted financial transactions. The general idea was that disinterested professionals applying the best ideas could be better at running stuff (anything) than ordinary people left alone.

There is a lot of money in the financial sector, of course, so there are plenty of ways to catch the disinterested experts ' attention through campaign contributions, speaking fees, and more blatant bribes. Financial sector regulation is a use of government power that enhances government power and allows politicians to acquire political power and financial wealth. Greed is a fascinating phenomenon that manifests itself in controlling (and demonizing) the selfish.

The 1913 Federal Reserve Act made government experts legally responsible for the financial sector. And the Radical approach, if the experts are right, is to reinforce the failed policy, not change it. In the Liberal view, it seems, the experts ' opinions are trumping, so if legislation messes up the financial market, the solution is more regulation, and someone else's fault.