Practice Management

Financial regulation in America: A British view.

By Dan Hull

See an opinion piece entitled "Better broth, still too many cooks" in this week's The Economist. It is a critique of the Obama administration's plans (and new white paper) for U.S. financial reform. The article hits a high note in the beginning: a portrait of a vast, clumsy, and myopic animal that is our current system of financial regulation:

There is both too much of it and too little. Multiple federal agencies oversee the financial system: five for banks alone, and one each for securities, derivatives and the government-sponsored mortgage agencies. They share these duties with at least 50 state banking regulators and other state and federal consumer-protection agencies.

Yet all these regulators failed to anticipate and prevent the worst financial crisis since the Depression, because risk-taking flourished in the cracks between them. Toxic subprime mortgages were peddled by lenders with little federal oversight and shoved into off-balance-sheet vehicles. The greatest leverage accumulated in firms that avoided the capital requirements of banks.

TriStar Pictures, Inc.

Full post as published by What About Clients? on June 19, 2009 (boomark / email).