Check out this article in the Guardian about a new report out from the IMF on international regulation:
"In a hard-hitting report, it accused policymakers of falling short in their efforts to protect taxpayers from banks that are still too big to fail."
http://www.theguardian.com/business/2014/mar/31/western-banking-regulations-costly-mutually-destructive-imf-report
Should we trust the experts at the IMF? Does the US and other homes to financial superpowers lack the regulative teeth to safeguard our systems? What do you think?
"In a hard-hitting report, it accused policymakers of falling short in their efforts to protect taxpayers from banks that are still too big to fail."
http://www.theguardian.com/business/2014/mar/31/western-banking-regulations-costly-mutually-destructive-imf-report
Should we trust the experts at the IMF? Does the US and other homes to financial superpowers lack the regulative teeth to safeguard our systems? What do you think?
I pretty much agree with the IMF's conclusions. It's long been established that banks need more regulation. In my view, Greenspan's deregulation was a main cause of the crisis. That kind of extreme Laissez-faire capitalism doesn't work because the government's regulatory functions are what enables the free market to be healthy and sound. We need government to restrict excessive leverage, keep investment banks from speculating with depositor's money, prevent brokers from front-running their clients, and much more.
ReplyDeleteHere's an article from Paul Krugman's blog about why we need regulation:
http://www.nytimes.com/2012/05/14/opinion/krugman-why-we-regulate.html
I do think that people, myself included, are generally hidden from the reality of how banks operate. When banks have lots of power, there's a need for more transparency and regulation to prevent such power from being misused.
ReplyDeleteIs this true that there are cases in which financial institutions back government officials in their campaigns?
I think it's important to keep in mind that increasing regulation can very easily stunt economic growth. When bank's are forced to hold capital, there is less available to the overall economy to put towards innovation. Of course there should be more caution used when making these risky investments and the FSB is moving in the right direction, but we also must recognize that some of these investments are necessary to drive the economy forward, and we must be careful not to take these measures too far.
ReplyDeleteNo regulation=chaos. Too much or wrong regulation=paralysis. What a choice. And who should decide?
ReplyDeleteI think it is important to definitely have regulations that protect taxpayers and require banks to make some adjustments in order to lower the risk of some kind of financial crisis within their institution. However, I also agree with Joe about the fact that those measures can not go too far because if not, banks by not using their capital, by not lending out to the public, and by not borrowing would be affecting the money supply and the money creation process.
ReplyDeleteacts like dodd frank need to be put in place to increase more oversight for financial institutions and the like. the problem is also the complexity of financial jargon, lack of transparency, and accountability of banks. thus, there is a need for effective regulations that do not trump economic activity but ones that create more visibility for lenders and borrowers on institutional level.
ReplyDeleteI agree with the experts of IMF. Reckless lending behavior needs to be regulated. Joe made a very good point that when banks are forced to hold capital, there is less available to economy. But this cannot be used as a license for risky investments. In most cases, risky investments are the source of crisis. It is best to address the problem at its source rather than trying to clear the mess later.
ReplyDeleteThe proper solution to this problem is neither more government oversight nor less regulations. The solution is the establishment of a legal environment that encourages banks to conduct economically feasible behavior. Now, I do not have a strong knowledge about the financial markets so I would not be able to offer a description of what that legal environment should be like (that is why I'm taking this class to learn more about the financial markets). However, I know the same economical and legal principles apply to every industry.
ReplyDelete