Deregulation refers to the removal or reduction of government regulations on businesses and industries. In the context of the 1980s and early 1990s, deregulation had a significant impact on the financial industry, particularly in the United States. There are a few key ways in which deregulation contributed to trends such as hostile takeovers and the savings and loan crisis.
Firstly, deregulation allowed for greater competition and consolidation within the financial industry. As barriers to entry were lowered, larger financial institutions were able to acquire smaller ones and expand their operations. This led to a trend of hostile takeovers, in which one company would attempt to acquire another company against the wishes of its management.
Secondly, deregulation allowed for greater risk-taking by financial institutions, particularly in the area of lending. With fewer regulations in place, banks and other lenders were able to take on greater amounts of debt and engage in riskier lending practices. This contributed to the savings and loan crisis, which saw many savings and loan associations (S&Ls) fail due to risky investments and poor management.
Finally, deregulation contributed to a culture of lax oversight and accountability within the financial industry. With fewer regulations in place, there was less scrutiny of financial institutions and their practices. This led to a lack of transparency and accountability, which in turn contributed to the problems seen in the savings and loan crisis.
Overall, deregulation played a significant role in the financial trends of the 1980s and early 1990s, including hostile takeovers and the savings and loan crisis. While deregulation was intended to promote greater competition and innovation, it also contributed to a culture of risk-taking and lax oversight that ultimately led to significant financial problems.