In a new commentary posted today, I argue that if Congress makes choices on political criteria alone, reforms are likely to damage the country’s economic recovery. Instead, there are three guiding principles that lawmakers should bear in mind when writing new regulations for Wall Street:
- Facilitate competition; don’t stifle innovation
- Build resilience into risk management
- Beware of creating perverse incentives
Getting regulation right is hard work,. Even with their good intentions, regulators too often skew market activity and create perverse incentives for investment. Although many financial sector regulations are out of date and problematic, the restructuring process could cause even more damage if it is not done properly.
See here for the whole article, explaining what these three principles mean and why they are importatnt.