Paul Fekula

How to Break the Boom and Bust Cycle

I am not sure if regulation is the effective answer. After 1929, everyone said: "Never again," and sure enough there was a regulation overhaul that worked pretty well... until now. Nevertheless, I am not sure if that explicit, government regulation made so much of a difference. At the end of the day, we are seeing the deflation of a 20-odd year credit bubble. However, that had more to do with monetary policy than it did with bank regulation. Regardless of what kind of regulations we impose on banks, at the end of the day, lending standards are going to be tighter for decades to come, and banks will probably be less leveraged. We still have a lot of pain to come in this crisis, and the banks left standing at the end of it all are going to remember it for a long time. I figure that's at least as good as any regulation congress could try to impose.