The Upside of Regulatory Paralysis

Joe Nocera explains one downside to having a single powerful regulator:

Our problems would have been much, much worse if we had implemented Basel II. I guess this is one of those times when the paralysis created by all our overlapping bank regulators saved us.

This is true: power can always be used for good or for ill, to regulate or to deregulate, to give the banks more of what they want, or less. But that doesn’t mean that paralysis is a good thing. It just means that governments have to be super-careful not to let regulators be captured by the banking industry. Which, in places like New York and London, is much easier said than done.

Comments

[Michael Clark:]

Let's not ask the bankers what they want. We know what they want. Let's tell the bankers what we want. If we make a mistake with too much regulation, then we can fix it. Let's not err on the side of too much forgiveness and fear that we might hurt someone's feelings or make it hard for US banks to still dominate the world. We don't want the banks to be #1. We want to banks to serve American citizens, not be served by the world citizens.

Sep 27 03:39 AM