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The Economists' Voice 2.0The Financial Crisis, Health Care Reform, and More$
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Joseph Stiglitz and Aaron Edlin

Print publication date: 2014

Print ISBN-13: 9780231160155

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231160155.001.0001

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Financial Regulatory Reform

Financial Regulatory Reform

The Politics of Denial

(p.57) Chapter 7 Financial Regulatory Reform
The Economists' Voice 2.0

Richard A. Posner

Columbia University Press

This chapter first analyzes the financial regulatory reforms proposed by the Obama administration to prevent a recurrence of the 2008 financial crisis. These include constituting the Federal Reserve the “systemic risk regulator” of the entire banking system, covering all or virtually all types of financial intermediaries, including broker-dealers, investment banks, hedge funds, money-market funds, industrial loan companies, mortgage banks, insurance companies, as well as commercial banks and thrifts; and creating a Consumer Financial Regulatory Commission that would take over the consumer protection functions now exercised by bank regulators and the Federal Trade Commission and would be given comprehensive power to regulate consumer financial products, such as mortgages and credit cards. The chapter then identifies the major causes of the financial crisis: the profoundly flawed monetary policy and the ignorance and inattention of the regulatory agencies. It concludes by addressing the question of whether the officials complicit in the causes of the crisis should write the reforms.

Keywords:   economic policy, financial policy, financial regulation, fiscal policy, 2008 financial crisis, Federal Reserve, Consumer Financial Regulatory Commission, Federal Trade Commission

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