Skip to main content

Newsroom

July 26, 2013

Banking Reform’s Fear Factor

Nearly five years after the worst financial crisis since the 1930’s, and three years after the enactment of the Dodd-Frank financial reforms in the United States, one question is on everyone’s mind: Why have we made so little progress?

New rules have been promised, but very few have actually been implemented. There is not yet a “Volcker Rule” (limiting proprietary trading by banks), the rules for derivatives are still a work-in-progress, and money-market funds remain unreformed. Even worse, our biggest banks have become even larger. There is no sign that they have abandoned the incentive structure that encourages excessive risk-taking. And the great distortions from being “too big to fail” loom large over many economies.

There are three possible explanations for what has gone wrong. One is that financial reform is inherently complicated. But, though many technical details need to be fleshed out, some of the world’s smartest people work in the relevant regulatory agencies. They are more than capable of writing and enforcing rules – that is, when this is what they are really asked to do.

The second explanation focuses on conflict among agencies with overlapping jurisdictions, both within and across countries. Again, there is an element of truth to this; but we have also seen a great deal of coordination even on the most complex topics – such as how much equity big banks should have, or how the potential failure of such a firm should be handled.”

***

Read full Project Syndicate blog post here

In the News
Share

MEDIA REQUESTS

For media inquiries, please contact us at
press@bettermarkets.org or 202-618-6433.

Contact Us

For media inquiries, please contact press@bettermarkets.org or 202-618-6433.

To sign up for our email newsletter, please visit this page.

Name(Required)
This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact press@bettermarkets.org or 202-618-6433.

Donate

Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today