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Americans are infatuated with the stock markets, and today’s stock markets are dominated by a small number of large institutions that manage enormous amounts of money. Those two facts are paradoxical given the history of stock markets in the United States. Modern stock markets in the United States are the consequence of federal legislation responding to widespread social and economic harm caused by the stock market crash of 1929. That legislation was designed to avoid the concentration of economic power in a small number of institutions. Despite those historical facts, over the past century, the centrality of the stock markets in the U.S. economy has steadily grown, and a handful of enormous institutions have come to manage an outsized portion of the money in those markets.
This Article explores the historical choices and forces that led us to this point. It describes the cultural and political forces that led U.S. lawmakers to favor market financing, at first reluctantly, but eventually unabashedly. It catalogs federal lawmaking around the securities markets over the near century between 1929 and today. This review of lawmaking uncovers how, over this time, lawmakers’ affinity for markets strengthened as their skepticism of institutions disappeared. It concludes that once policymaking embraced the capital markets, the development of investment intermediaries was
all but inevitable.
Emily Winston *
* Assistant Professor, University of South Carolina School of Law.