During the Great Depression, American policymakers decided that speculation was best controlled by limiting the speculators’ access to financial leverage. As a result, margin loans were limited by federal law to 50 percent of stock values. This policy has since broken down with the advent of financial derivatives, as the case of LTCM demonstrates in extremis. (Note: LTCM stands for Long-Term Capital Management, a nearly bankrupt hedge fund bailed out by the Federal Reserve Bank of New York in 1998). It has recently been proposed that derivatives should be subject to the same margin limits as conventional stock purchases. Restrictions on speculators’ ability to achieve almost limitless leverage through the derivatives market might lessen the risk of systemic crisis in the financial world. Improved information in the almost unregulated derivatives world would also hinder excessive accumulation of debt, such as occurred at LTCM.

According to the text, Depression Era policy of limiting speculators’ access to financial leverage

Item 1 - has been overturned by new legislation;