Sometimes there’s a legislative majority who believe that certain aspects of regulation do more harm than good, prompting deregulation. When the government deregulates an industry, it modifies existing rules in the hope of improving competition and reducing what the public pays for products and services.
One of the most successful instances of securities deregulation occurred in 1975, when fixed-rate brokerage firm commissions were allowed to float for the first time. Rates dropped across the board at
full-service brokerage firms,
and
discount brokerage firms
were born.
More recently, in 1999 Congress removed the barriers that had been placed between the commercial banking, insurance, and investment industries by the Glass-Steagall Act following the 1929 crash. At that time, bank failures were blamed in part on their losses in the stock market.
Now you have access to a wider range of financial products and services from the same institution, such as bank accounts through your brokerage firm and securities through your bank, which may both be part of the same multi-service institution.
But any time the regulators change the rules, new issues arise. In this instance, privacy advocates worry about the impact of information sharing between linked financial companies. And smaller banks and brokerage firms find themselves struggling to compete with the all-in-one firms — and sometimes disappearing.
