If a major event occurs - with significant social, economic, and political repercussions - but the response is wiped out, has anything truly changed? That's an important question to consider a decade after the 2008 financial crisis rocked our nation's institutions to the core.
The Crash: A Look Back
High mortgage approval rates and investment products backed by subprime mortgages eventually led to the failure of massive financial institutions, most notably investment firms such as Bear Stearns and Lehman Brothers. With additional bankruptcies by AIG and Merrill Lynch, many others feared to be just around the corner. Therefore, the federal government decided to intervene to bail out the financial system in the fall of 2008.
The Obama administration created numerous regulations in the aftermath of the crash in addition to Congress passing the Dodd-Frank Wall Street Reform and Consumer Protection Act. The 2,300-page act created new government agencies to oversee the financial system and created rules that aimed to prevent institutions from once again becoming "too big to fail" and requiring bailouts.
10 years later, a confluence of circumstances has resulted in many of those regulations being eliminated or weakened via legislation, executive order, and court actions. For example, the Senate took bipartisan action earlier this year to exempt "financial companies with assets between $50 billion and $250 billion from the highest levels of scrutiny by the Federal Reserve" (Source: "10 years after financial crisis, Senate prepares to roll back banking rules", The Washington Post).
Perhaps more importantly, "several courts have determined that certain Obama-era regulatory efforts are suspect - and indeed ultimately invalid - as a purely legal matter." Combining this fact with the Trump administration having a "general deregulatory bent and that the administration is intent on reversing significant portions of the Obama administration's regulatory activity" and it seems only a matter of time before many of the rules and regulations enacted in the wake of the 2008 crash disappear. (Source: "The Courts' Take On Obama-Era Regs: You Are Erased", Law360).
What does this mean for investors, deposit holders and others who depend on our financial institutions? It means that the onus is on them to look out for their own financial interests, as the regulations that may have provided peace of mind could be at risk. Deposit insurance and other safeguards are nice, but they are no substitution for doing your own research about where it is safe to place your money. It is more important than ever to be aware of your rights, so you can take actions to protect your financial and legal interests in the face of regulatory uncertainty.