Bruce Bartlett explains why the financial sector is unlike any other:
The basic problem is that the financial sector faces systemic risk in a way that no other industry does: By its nature, it is a house of cards that can collapse at a moment’s notice. . . .First, the vast bulk of the nation’s money supply is in the form of bank deposits, not currency and coin. No bank on earth could pay even a fraction of its depositors if they all demanded all their funds in cash immediately. This is called a run on the bank (and is very familiar to anyone who has ever watched "It’s a Wonderful Life"). . . .
Read the whole thing.
P.S. One question: If Bartlett is correct, does that mean that financial institutions ought to be regulated more heavily than other sectors? (And do we, therefore, seem to have our regulatory regime backward? We need less for regular businesses--far fewer OSHA regulations, ADA regulations, affirmative action requirements, housing restrictions, etc., but perhaps more regulation, or simply wiser regulation, of finance).
Richard
Its not a case of more regulation per se, but intelligent regulation. Our financial regulatory system is woefully out of date. Most of the rules date back to the depression era. Our financial markets are now global in nature and the landscape of the financial service industry is more complex than it was in 1940. Yet these markets are governed by 1930/40's regulations.
Most free marketeers need to wake up and smell the coffee. Stubborn ideological positions are going to kill the prosperity we enjoy and want to continue.