Based on Edward Kupiec’s Wall Street Journal op-ed I can’t quite make out whether he opposes bank regulation because it’s ineffective:
Macroprudential regulation, macro-pru for short, is the newest regulatory fad. It refers to policies that raise and lower regulatory requirements for financial institutions in an attempt to control their lending to prevent financial bubbles.
These policies will not succeed. Consider the most common macroprudential tool: raising or lowering bank minimum capital standards. Academic research—including a recent study I co-authored with Yan Lee of the Federal Deposit Insurance Corp. and Claire Rosenfeld of the College of William and Mary—has found that increasing a bank’s minimum capital requirements by 1% will decrease bank lending growth by about six one-hundredths of a percent.
or because it’s effective. It may be a more general distaste for regulation:
Government regulators are no better than private investors at predicting which individual investments are justified and which are folly. The cost of macroprudential regulation in the name of financial stability is almost certainly even slower economic growth than the anemic recovery has so far yielded.
In my view the only possible sense that the “save the banks and bankers first” strategy we have used made was as an emergency measure. Whatever emergency there was passed long ago. I can only guess that some combination of self-interest and the baleful effect of mathematics on economics has not only prolonged emergency measures but turned them into an investment strategy.
The reality is that while the economy will be weaker without sound banks, banks cannot becvome sound without a solid underlying economy and regulators, legislators, politicians, and pundits have fought any measure that might have put the economy on a sounder footing with all of their might.