Background Considerations to a Regulation of the U.S. Financial System--Third Time a Charm? Or Strike Three?
AbstractUnited States financial regulation has traditionally made functional and institutional regulation roughly equivalent. However, the gradual shift away from Glass-Steagall and the introduction of the Financial Modernization Act (FMA) generated a disorderly mix of functions and products across institutions, creating regulatory gaps that contributed to the recent crisis. An analysis of this history suggests that a return to regulation by function or product would strengthen regulation. The FMA also made a choice in favor of financial holding companies over universal banks, but without recognizing that both types of structure require specific regulatory regimes. The paper reviews the specific regime that has been used by Germany in regulating its universal banks and suggests that a similar regime adapted to holding companies should be developed.
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Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_557.
Date of creation: Mar 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-28 (All new papers)
- NEP-HIS-2009-03-28 (Business, Economic & Financial History)
- NEP-PKE-2009-03-28 (Post Keynesian Economics)
- NEP-REG-2009-03-28 (Regulation)
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