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62 Md. L. Rev. 515 (2003)
The Law and Macroeconomics of the New Deal at 70

handle is hein.journals/mllr62 and id is 525 raw text is: THE LAW AND MACROECONOMICS OF THE NEW DEAL AT 70 STEVEN A. RmiREz* Recent turbulence in the financial markets, first as a result of Sep- tember 11, 2001, and then as a result of the realization in the summer of 2002 that corporate America was plagued by pervasive corruption, once again has shown that capitalism needs government intervention to thrive.' The crisis in investor confidence in the summer of 2002 in particular refocused attention on the seventy-year-old regulatory infra- structure imposed upon the economy as part of the New Deal.2 In both instances, the federal government jumped to the rescue of so- called free markets that seemed to be spinning into the abyss of seri- ous adverse macroeconomic dysfunction.3 It wasn't always so. * Professor, Washburn University School of Law. Professor Bill Rich and Professor Alex Glashausser contributed many helpful insights to this Article. This Article also bene- fited from a presentation in September 2002 at the Central States Law School Association, hosted by the University of Kentucky College of Law. 1. One example of the strength of the consensus supporting massive government in- volvement in our nation's economy was the swift response of the government to address the economic consequences of the September 11, 2001 attack on the World Trade Center in New York City. On September 17, 2001, the Federal Reserve Board (the Fed) cut rates for the eighth time that year in order to stabilize financial markets worldwide. Richard W. Stevenson, Fed Cuts Rate by Half-Point in an Attempt to Aid Stocks, N.Y. TIMES, Sept. 18, 2001, at Cl. By the end of September, in order to stem the imminent collapse of some carriers and the cascading losses that would have hit the banking industry, the government injected $5 billion in cash into the airline industry and stood ready to guarantee another $10 billion in loans. Barbara A. Rehm & Laura Mandaro, U.S. Bailout for Airlines Looks Good for Lenders, AM. BANKER, Sept. 27, 2001, at 1. On the regulatory front, the Fed injected billions of dollars into the banking system and the Federal Deposit Insurance Corporation (FDIC) acted to encourage banks to take greater risks in lending to customers suffering adverse consequences from the disaster. E. Scott Reckard & James S. Granelli, Lenders Look for Economic Equilibrium, CHI. TRiB., Sept. 28, 2001, § Business, at 3. Congress quickly acted to extend unemployment benefits to the ever increasing army of laid-off employees in the aftermath of the attack. Delroy Alexander, Surge in Layoffs Vaults Claims to 9-Year High, CHI. TRIB., Sept. 28, 2001, § Business, at 1. Ultimately, the federal government undertook to act as insurer of last resort with respect to the risks of terrorism, for $100 billion. Christopher Oster, Terrorism Bill Boosts Insurers' Risk, WALL ST. J., Nov. 27, 2002, at C9. Little protest from laissez-faire enthusiasts arose in response to these actions. 2. See Robert Kuttner, Today's Markets Need a Whole New Set of Rules, Bus. WK., July 29, 2002, at 26 (stating that reforms designed to stem pervasive wrongdoing during the late 1920s are inadequate to stem wrongdoing today and that laissez-faire and market funda- mentalism had proven once more to be a disgrace). 3. For example, when President Bush signed the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (codified in scattered sections of 15 U.S.C., 18 U.S.C., and 28 U.S.C.), he specifically compared the new Act to the New Deal, stating that it contained 'the most far-reaching reforms of American business practices since the time of Franklin

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