For readers who want to explore the history of the deregulatory focus as explanation of the credit crisis, the following links may be of interest:
Wikipedia, Commodities Futures Modernization Act of 2000 (providing brief legislative history and sketchy information about major problems of bill--Enron loophole and ban on regulation of credit default swaps) (Note that this does not provide links to the hearing in the Agriculture subcommittee, which is provided below).
Nomi Prins, Where Credit is Due: A Timeline of the Mortgage Crisis, Mother Jones, July/August 2008 (shows the role of the deregulation of financial entities and instruments, including the pivotal role played by Phil Gramm in the non-regulation of credit default swaps and similar instruments in connection with the midnight passage of the Commodities Futures Modernization Act in December 2000).
Patrician Hilday Hart, John McCain's Gramm Gamble, The Texas Observer, May 30, 2008 (discusses the passage of the Commodities Futures Modernization Act in December 2000 and Gramm's role in deregulating the financial industry).
Elinore Longobardi, The Press and Phil Gramm, Columbia Journalism Review, Sept. 24, 2008 (providing a bevy of sources for articles discussing the Gramm role in deregulation of the financial services industry).
The Commodities Futures Modernization Act of 2000 (added as Appendix E to Pub.L. 106-554) (note various sections titled "regulatory relief" or "exclusion from regulation").
David Goldman, Democrats [Urge]: Close Speculation Loophole, CNNMoney.com, May 8, 2008 (noting that the Commodities Futures Modernization Act allowed speculation to drive up energy prices in the US by allowing oil futures to be traded on unregulated electronic markets).
James Ridgway, Phil Gramm's Enron Favor, the Village Voice, January 15, 2002 (discussing the Enron debacle and the Gramm's links to Enron and the rider to the omnibus legislation that was a major factor in deregulation).
Statement of Tom Ewing, Ill, Chair, Subcomm. on Risk Management, Research & Specialty Crops, House Comm. on Agriculture, Hearing on Commodities Future Modernization Act, HR 4541, June 14, 2000 (asserting the importance of passing a bill now, because "America's financial industry is involved in a global battle. If the U.S. futures exchanges and the over-the-counter industry are to compete with new electronic exchanges and other foreign competition such as EUREX we need to send a clear message that the United States will have a fair and competitive regulatory system.") (NOTE: "fair and competitive regulatory system" appears to be code for relaxing regulation) (FURTHER NOTE: statements of other witnesses at the hearing follow in this same document. These make clear that the SEC had very strongly opposed the regulatory "reforms" of the Depression Era Shad-Johnson controls, and that the CFTC generally supported the bill, saying that financial derivatives were generally adequately overseen elsewhere while still objecting to nonregulation of energy futures through creation of a new exemption to the Commodities Exchange Act. The Treasury representative sounded an important note of caution, which rings especially true in hindsight: "The challenge for this subcommittee and Congress is to establish a regulatory regime that will strike a balance between allowing the economy to realize more fully the benefits of derivatives and, at the same time, ensuring the integrity of the underlying markets, providing appropriate protection for retail customers, and where possible, taking steps to mitigate systemic risk." ephasis added).
Patrick Parkinson, Fed Reserve, testimony before the Senate Banking Committee, Sept. 8, 2005 [describing swaps, such as the Credit Default Swaps, that were explicitly left unregulated by the 2000 Commodities Futures Modernization Act]: "Such transactions are not readily susceptible to manipulation and eligible counterparties can and should be expected to protect themselves against fraud and counterparty credit losses. Exclusion of these transactions resolved long-standing concerns that a court might find that the CEA applied to these transactions, thereby making them legally unenforceable. At the same time, the CFMA modernized the regulation of U.S. futures exchanges, replacing a one-size-fits-all approach to regulation with an approach that recognizes that the regulatory regime necessary and appropriate to achieve the objectives of the CEA depends on the nature of the underlying assets traded and the capabilities of market participants. Together, these provisions of the CFMA have made our financial system and our economy more flexible and resilient by facilitating the transfer and dispersion of risk. Consequently, the Board believes that major amendments to the regulatory framework established by the CFMA are unnecessary and unwise." (emphasis added).