IDEAS home Printed from
   My bibliography  Save this article

How Financial Oversight Failed & What it May Portend for the Future of Regulation


  • Richard Herring



This paper analyzes the role that well-intentioned policies contributed to the crisis and increased its severity. It also examines the principal-agent problems in the public sector that enabled many of the principal-agent problems in the private sector often blamed for the crisis. The legacy of the crisis is a massive series of bailouts by public authorities in Europe and the United States that risked the equivalent of nearly one-fifth of world GDP in taxpayer funds. This moral hazard will lead to deeper and more frequent crises unless countered by a new approach to regulation that places greater emphasis on market discipline by creditors and counterparties. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Richard Herring, 2010. "How Financial Oversight Failed & What it May Portend for the Future of Regulation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(3), pages 265-282, September.
  • Handle: RePEc:kap:atlecj:v:38:y:2010:i:3:p:265-282
    DOI: 10.1007/s11293-010-9237-z

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Kane, Edward J., 2011. "Unmet Duties in Managing Financial Safety Nets," Business Ethics Quarterly, Cambridge University Press, vol. 21(01), pages 1-22, January.
    2. Kane, Edward J, 1977. "Good Intentions and Unintended Evil: The Case against Selective Credit Allocation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 55-69, February.
    3. Edward Kane, 2010. "The Importance of Monitoring and Mitigating the Safety-Net Consequences of Regulation-Induced Innovation," Review of Social Economy, Taylor & Francis Journals, vol. 68(2), pages 145-161.
    4. Herring, Richard J., 2010. "Wind-Down Plans As an Alternative to Bailouts: The Cross-Border Challenges," Working Papers 10-08, University of Pennsylvania, Wharton School, Weiss Center.
    5. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
    6. Jose A. Lopez, 1999. "Using CAMELS ratings to monitor bank conditions," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun.
    7. Kane, Edward J, 1981. "Accelerating Inflation, Technological Innovation, and the Decreasing Effectiveness of Banking Regulation," Journal of Finance, American Finance Association, vol. 36(2), pages 355-367, May.
    8. Richard J. Herring & Edward J. Kane, 2009. "Financial Economists Roundtable Statement on Reforming the Role of the Rating "Agencies" in the Securitization Process," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(1), pages 28-33.
    9. Kane, Edward J., 1980. "Politics and Fed policymaking : The more things change the more they remain the same," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 199-211, April.
    10. Gary Gorton, 2009. "The Subprime Panic," European Financial Management, European Financial Management Association, vol. 15(1), pages 10-46.
    11. Kane, Edward J, 1984. " Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition," Journal of Finance, American Finance Association, vol. 39(3), pages 759-772, July.
    12. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
    13. Richard Herring & Edward J. Kane, 2010. "Rating "Agencies": How Regulation Might Help," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(1), pages 14-23, 04.
    14. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, vol. 2(3), pages 191-309, June.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Flannery, Mark J. & Giacomini, Emanuela, 2015. "Maintaining adequate bank capital: An empirical analysis of the supervision of European banks," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 236-249.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:38:y:2010:i:3:p:265-282. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.