The role of regulation in the creation and evolution of the financial crisis has been one of the hottest debate topics in the midst of this recession. Undoubtedly, regulators played a part in creating the mess, though how and to what degree remains undecided. One thing that everyone agrees on is the need for change in the current financial sector regulatory structure. What isn’t agreed upon is whether change should take the form of new regulations or the repeal of old, problematic rules. And the change camps disagree on what kind of laws should be added, or which ones should be repealed.
In a new policy study published by Reason today, I take a look at the Obama administration's proposals to reform Wall Street regulations and offer recommendations to ensure that taxpayers are no longer forced to bail out banks and companies deemed "too big to fail."
The paper also discusses principles for regulating financial services. Developing a good framework for assessing regulatory change and examining the history of deregulation secures an established base for considering proposed solutions to today’s problems.
Also see my policy brief from August breaking down the Obama and GOP regulation plans in basic form here.