Academic

Two Parts of Financial Reform

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

One way to think about what financial reform will look like is to split the options into the substantive and the institutional.  The institutional question - should there be a single financial supervisor, or a range of competitors trying to do a good job? - isn't really on the table yet, but there is some suspicion among those I talk to that rather than reinventing the regulators, legislation will try to coordinate them more, either through the President's Working Group or through something more elaborate.

The substantive question is different, and it is the subject of the leaks today. It covers issues that can be answered regardless of the sort of regulator that emerges.  Should there be clearinghouses for CDS and exotic derivatives?  Should there be a longer and broader list of systemically important institutions, with tough and countercyclical capital requirements, severe compensation limitations, and low leverage?  

Wonkish, and not exactly easy to answer, but crucial, of course.  I'll be talking about international aspects of the crisis at the American Society of International Law today.  Stop by and say hello if you're going too.

Full post as published by Conglomerate on March 26, 2009 (boomark / email).