Academic

Our New Financial Regulatory System

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

When I was an undergraduate, I took a class on taxation in the spring of 1986. At the time, Congress was revising the Internal Revenue Code, ultimately producing the Tax Reform Act of 1986. My professor (who was about to retire) seemed oblivious to goings on in Washington, as he made us learn exclusively the old law. That class soured me on taxation to the point where I couldn't even bring myself to take the introductory tax class in law school, though I eventually bit the bullet and took corporate taxation, which was a lot more interesting than my undergraduate class!

Next semester, I am slated to teach securities regulation, and I am wondering whether I will find myself in much the same position as my undergraduate professor (sans the lack of motivation as a result of being on the cusp of retirement). My class deals with many fundamental concepts of disclosure and fraud that would be useful in any regulatory regime, but how much will that regulatory regime change, even as we are studying it? Here is the latest:

Sen. Charles Schumer (D., N.Y.) said Congress would try to redraw supervision of financial markets completely in the first six months. "Whether the economy was in tatters or not, we need a new system of regulation," said Sen. Schumer, a leading member of the Senate Banking Committee. (emphasis added)

How much will this affect Securities Regulation (the class)? It's hard to say at this point. Some of the relevant possible reforms mentioned in the article include:

• Creation of a "systemic-risk regulator"
• Shareholder approval of executive compensation packages
• Merger of the SEC with the Commodity Futures Trading Commission

Of course, much of what will happen over the next year will affect banking regulation more than securities regulation, but it appears that everything is on the table.

Full post as published by Conglomerate on November 06, 2008 (boomark / email).