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Repairing Bank Regulation

The broad dimensions of the Obama administration’s regulatory overhaul set for release this week have been sketched out in media reports.

According to The Wall Street Journal, the administration white paper will strengthen the Federal Reserve’s role as primary systemic risk regulator. The administration also reportedly will seek to empower a “council” of regulators (comprising the Treasury, the Fed and FDIC) to seize and unwind large institutions in danger of failing. However, the program won’t reduce the number of federal agencies that oversee financial institutions and products, nor place specific ceilings on banks’ size, scope or compensation levels.

Can such an approach substantially reduce the danger of another financial-system crisis?

If not – then what is the most important missing ingredient?

Comments (2)

  1. There is not 1 single element when it comes to government and investing. Bush has tried to make it 1 single element whic is no fun at all for the investors, and the savy investor. Nor is it fun on the sales side for the salesperson who is selling securities. There are many elements that need to be address, which is directly linked to how security regulation will fail or gain. Because, currently, it is directly linked to these 2 groups, the sellers and the buyers. Reforming Capital Requirements for financial firms is one major element whic his currently by the people, and which will most likely continue, it could never be run by government. In includes bringing firms back to financial stability, a new internal information climate for firms (including the way sellers are received by the public – for example quotes from a Merrill Lynch seller/trader was saying how “It is fun” about all the squabbling inside his firm about bonus pay-outs) Reformation of global turmoil, our energy crisis, and helth care reform for the people. Bringing it all together is what matters in a financial world, which is difficult to do, especially that we have had some bad apples in the mix, like Madoff.

    Lorinda Pranzo Reply
  2. One needs to take a more holistic approach to the reformation of the financial service indusrty. Prospectives clients need to be screened more responsible to evaluate their credit risk. This does not however mean that credit supply is cut completely. It is of vital importance that senior management in the financial service institutes are responsible and forward looking.

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