Broken Bargain

A history of major financial crises--and how taxpayers have been left with the bill. In the 1930s, battered and humbled by the Great Depression, the U.S. financial sector struck a grand bargain with the federal government. Bankers gained a safety net in exchange for certain curbs on their freedom: transparency rules, record-keeping and antifraud measures, and fiduciary responsibilities. Despite subsequent periodic changes in these regulations, the underlying bargain played a major role in preserving the stability of the financial markets as well as the larger economy. By the free-market era…