Conglomerate Blog: Business, Law, Economics & Society

What will the new architecture of financial regulation look like? Larry Cunningham and I have just posted a piece on SSRN suggesting that the choices may not be quite as large as one might think, and that caution and modesty are appropriate before a major reorg. The paper is available for download and is forthcoming in the George Washington Law Review. Larry discusses it here, and the abstract is here:

Unprecedented interest in financial regulation reform accompanies the nearly-unprecedented scale of financial calamity facing the world. Dozens of elaborate reform proposals are in circulation, most determined to revolutionize financial regulation. No doubt, the crisis makes reevaluation essential, but we contribute a cautionary analysis amid the exuberant atmosphere. Reforms should not discount the value of traditional financial regulation, overlook the functional regulatory reform that has already occurred, or overstate ultimate differences between contending reform proposals.

Despite proliferation of dozens of reform proposals, our analysis leads us to conclude that there are ultimately only three or four principal alternatives: (1) the traditional fragmented model that divides power and presided over the generation of substantial wealth, yet signally failed to prevent the crisis of 2008; (2) the on-the-fly reforms effected by Treasury and Fed’s massive and unorthodox intervention into and extensive renovation of all financial services industries; and (3) seemingly radical proposals, one by Republicans at the onset of crisis (Treasury Secretary Paulson’s Blueprint), the other by Democrats after financial markets imploded (former Fed Chair Volcker’s Group of Thirty reports).

These three or four alternative approaches pose tests of our relative commitments to markets, organization, globalization and political control. Although each was developed in different circumstances by architects with different purposes, they cannot co-exist. One of them will provide the approach we take into the next crisis - and perhaps to pull us out of the current one. We provide a framework to consider each alternative and evaluate their respective advantages and disadvantages. Our analysis leads us to conclude that limited reform is best, recognizing the quasi-centralization that has occurred and the need to add protective regulation to particular areas that manifestly contributed to the global economic crisis that began in 2008.

Do give it a look, and do let us know if you have any comments or observations.

Financial Crisis | Bookmark

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345157d569e201157081d6ef970b

Links to weblogs that reference Three or Four Approaches to Financial Regulation:

What will the new architecture of financial regulation look like? Larry Cunningham and I have just posted a piece on SSRN suggesting that the choices may not be quite as large as one might think, and that caution and modesty are appropriate before a major reorg. The paper is available for download and is forthcoming in the George Washington Law Review. Larry discusses it here, and the abstract is here:

Unprecedented interest in financial regulation reform accompanies the nearly-unprecedented scale of financial calamity facing the world. Dozens of elaborate reform proposals are in circulation, most determined to revolutionize financial regulation. No doubt, the crisis makes reevaluation essential, but we contribute a cautionary analysis amid the exuberant atmosphere. Reforms should not discount the value of traditional financial regulation, overlook the functional regulatory reform that has already occurred, or overstate ultimate differences between contending reform proposals.

Despite proliferation of dozens of reform proposals, our analysis leads us to conclude that there are ultimately only three or four principal alternatives: (1) the traditional fragmented model that divides power and presided over the generation of substantial wealth, yet signally failed to prevent the crisis of 2008; (2) the on-the-fly reforms effected by Treasury and Fed’s massive and unorthodox intervention into and extensive renovation of all financial services industries; and (3) seemingly radical proposals, one by Republicans at the onset of crisis (Treasury Secretary Paulson’s Blueprint), the other by Democrats after financial markets imploded (former Fed Chair Volcker’s Group of Thirty reports).

These three or four alternative approaches pose tests of our relative commitments to markets, organization, globalization and political control. Although each was developed in different circumstances by architects with different purposes, they cannot co-exist. One of them will provide the approach we take into the next crisis - and perhaps to pull us out of the current one. We provide a framework to consider each alternative and evaluate their respective advantages and disadvantages. Our analysis leads us to conclude that limited reform is best, recognizing the quasi-centralization that has occurred and the need to add protective regulation to particular areas that manifestly contributed to the global economic crisis that began in 2008.

Do give it a look, and do let us know if you have any comments or observations.

Sun	Mon	Tue	Wed	Thu	Fri	Sat
		1	2	3	4	5
6	7	8	9	10	11	12
13	14	15	16	17	18	19
20	21	22	23	24	25	26
27	28	29	30	31