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Economic Commentary

The Government Securities Market and Proposed Regulation

The failure of several unregulated government securities dealers since 1982 has led to pressure for at least minimum regulation of this market. According to some estimates, the failures in 1985 of just two government securities firms, E.S.M. Government Securities Inc. (ESM) and Bevill, Bresler and Schulman Asset Management Corp., caused losses of over $500 million to those who dealt directly with them. Losses also were sustained indirectly by individuals who never transacted business with ESM, including taxpayers of municipalities such as Toledo, Ohio. The failure of ESM also produced a temporary decline in the foreign exchange value of the dollar, led to the temporary closing of 70 privately insured savings and loan associations in Ohio, and contributed to a subsequent loss of confidence in private deposit insurance systems in other states.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Balazsy, James J., Jr. 1986. “The Government Securities Market and Proposed Regulation.” Federal Reserve Bank of Cleveland, Economic Commentary 4/1/1986.