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Nancy Koehn on Boston Public Radio, 5/29/2018

As Congress Rolls Back Banking Regulations, One Historian Urges Caution

Donald Trump
President Donald Trump signs a memorandum on Orderly Liquidation Authority, Friday, April 21, 2017, at the Treasury Department in Washington. Trump signed an executive order to review tax regulations set last year by his predecessor, as well as two memos to potentially reconsider major elements of the 2010 Dodd-Frank financial reforms passed in the wake of the Great Recession. (AP Photo/Susan Walsh)
Susan Walsh/AP
Nancy Koehn on Boston Public Radio, 5/29/2018

This month, Congress approved changes to the 2010 Dodd-Frank Act, a series of banking reforms passed in the wake of the 2008 financial crisis to stabilize the nation's economy.

The rollback is limited, applying only to midsize and regional banks. Restrictions on the country's largest banks are still in place. However, Harvard Business School historian Nancy Koehn cautioned against deregulating the industries responsible for the 2008 crisis too quickly.

"Quite honestly, a lot of us forget what some of the principle drivers [were] of what became a housing crisis and then became a worldwide financial disaster with the very real possibility, on more than one occasion ... that the system would collapse," Koehn said.

"We forget that the reason a housing crisis and a softening economy got us very close to the edge of the cliff had a lot to do with the latitude of the financial services industry," she continued.

Koehn praised the regulatory "guardrails" that have kept the economy from major ups and downs.

"Guardrails have been in place historically in our country to keep financial institutions stable enough that we don't get close to the edge of the cliff," Koehn said.

Click the audio player above to hear more from historian Nancy Koehn.

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