Point of Information: Financial Reform Edition

It seems to me that the only yardstick by which to judge the financial reform bill making its way through Congress is whether, if the measures in the bill had been in place in, say, 2005 whether they would have prevented the crisis in the financial sector which to my eye appears to be ongoing. By that standard will the bill be successful?

As I read the tealeaves it will almost certainly be successful in (yet again) giving the largest banks competitive advantages over their smaller competitors, a perverse result since it was the biggest institutions that fomented the problems.

2 comments… add one
  • Maxwell James Link

    It depends on whether you think the Canadian banking system is the right model to follow. As this Simon Johnson post from a few months ago indicates, that’s basically the model we’re embracing, and to be fair they did weather the storm. He’s skeptical about that model’s future, though, as well as its viability here.

    Agreed that on balance, the bill reinforces the competitive edge of larger banks.

  • steve Link

    By your very strict definition, it might have stopped the crisis. It would have eliminated a large chunk of subprimes. Derivatives would have been on exchanges or otherwise quantified, so that there huge growth would have been noticed sooner. The bad part is that it leaves us with fewer, larger banks making us more vulnerable to the next crash.

    FinReg should have been more streamlined. Break up the banks making them a lot smaller. Set a maximum size. Set up some method for putting international financial organizations through bankruptcy. Then, make an explicit statement that banks that fail will not be rescued. You shouldnt need most of the rest of it then.

    Steve

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