JUSTO A TIEMPO (JIT)

The rules of banking were changed to match the changed landscape. Banks lobbied vigorously for deregulation and for limited government intrusion into the banking market.308 The gradual deregulation of banks expanded from the Carter to the second Bush Administration.309 The banking sector thought that government regulation was stifling market competition and that they could operate more profitably and efficiently without it. Proponents of deregulation advocated a banking regime that was as close to a free market as possible.310 There were many changes during this time, but most relevant here was the

308 _{Washington, supra note 295, at 111–12.}

309 _{See Richard B. Freeman, Reforming the United States’ Economic Model After the Failure of}

Unfettered Financial Capitalism, 85 CHI.-KENT L.REV. 685, 685–86 (2010) (discussing the development of banking deregulation throughout presidential administrations).

310 _{See Troy S. Brown, Legal Political Moral Hazard: Does the Dodd-Frank Act End Too Big to Fail?, 3}

ALA.C.R.&C.L.L.REV. 1, 8 (2012) (describing pro-market fundamentalism as “the basis for the incremental deregulation of the U.S. banking system”). See generally THOMAS F.CARGILL &GILLIAN G. GARCIA, FINANCIAL DEREGULATION AND MONETARY CONTROL:HISTORICAL PERSPECTIVE AND IMPACT OF THE 1980 ACT (1982). Cargill and Garcia argued that the problem with the structure of the financial system in the United States, beginning with reform legislation following the Great Depression through the 1970s, was that it constrained competition. Id. at 11–12.

530 EMORY LAW JOURNAL [Vol. 62:483 homogenization of banking.311 As a result of the deregulation, most banks resembled each other in their mission and purpose.312

The pluralism in banking was more or less abandoned and a more homogenized sector emerged. What this meant was that banks were all treated as market participants and forced to compete against each other for the same deposits and customers. The goals of the credit union and S&L were slowly lost and replaced by the demands of a competitive banking market. Many banks started to vigorously oppose the credit unions’ favorable tax status as they started to compete more directly with banks.313 Many believed that the banking market could meet the needs of the poor without these specially chartered institutions.314 Indeed, some have even claimed that securitization was the market’s answer to the home ownership goals of the S&Ls.315 As a natural extension, increased securitization during the housing bubble should have been the ultimate fulfillment of the American dream rather than a major setback.

After the collapse of the financial markets, few people today would advocate for the deregulation that was pushed in the 1980s. Many policy makers recognize now that the recent banking collapse was at least partly caused by the no-holds-barred deregulation of the 1980s that allowed banks to become larger and more active in a variety of markets.316 The Dodd-Frank Act

311 _{See James J. White, Introduction to the Banking Law Symposium: A 200 Year Journey from Anarchy}

to Oligarchy, 50 OHIO ST.L.J. 1059, 1063 (1989) (arguing that the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 (FIRREA) would speed the “ultimate assimilation [of savings and loans] into commercial banks”); Daniel E. Feder, Comment, Should Loan-to-Value Ratio Restrictions Be Reimposed on

National Banks’ Real Estate Lending Activities?, 6 ANN.REV.BANKING L. 341, 344–54 (1987) (positing that a main goal of the Garn-St Germain Depository Institutions Act of 1982 was “to deregulate and homogenize the deposit-taking financial institutions market”).

312 _{See White, supra note 311, at 1063; Arthur E. Wilmarth, Jr., The Transformation of the U.S. Financial}

Services Industry, 1975–2000: Competition, Consolidation, and Increased Risks, 2002 U.ILL.L.REV. 215, 476.

313 _{Banks and policy makers fought against tax advantages and other special privileges for credit unions}

and S&Ls. See G. Allen Hicks, Comment, Common Sense on the Common Bond: Banks, Federal Credit

Unions, and Field of Membership Rules, 66 TENN.L.REV. 1201, 1219–20 (1999).

314 _{See, e.g., id. at 1207 (noting studies showing that banks made more mortgage loans to low-income}

individuals than credit unions).

315 _{See Neil Fligstein & Adam Goldstein,A Long Strange Trip: The State and Mortgage Securitization,}

1968–2010, in THE OXFORD HANDBOOK OF THE SOCIOLOGY OF FINANCE (forthcoming 2013) (manuscript at 10–11), available at http://www.history.ucsb.edu/projects/labor/documents/Fligstein_ALongStrangeTrip_ UCSB.pdf.

316 _{See, e.g., R}

ICHARD A.POSNER, AFAILURE OF CAPITALISM:THE CRISIS OF ‘08 AND THE DESCENT INTO

2013] HOW THE POOR GOT CUT OUT OF BANKING 531 of 2010317 is, at least theoretically, a re-stiffening of banking regulation and a reasserting of regulatory control over banks.318 However, as policy makers have begun to question some of the principles of deregulation, none have drawn attention to some of the important victims of deregulation: the banks that used to serve the poor.