25 Sep Did Policymakers Get Post-Crisis Financial Regulation Right? in Economics and Finance
Economic and fiscal policy has an impact on so many aspects of our daily lives. BPC Action advocates for policies that promote economic security and opportunity for Americans; call for responsible federal fiscal policy to spur economic growth and stabilize the nation’s debt trajectory; and encourage the private-sector to innovate and mobilize resources in support of a changing economy. The following information is from BPC, our 501 (c) (3) affiliate.
Eight years after the worst of the financial crisis, the new U.S. financial regulatory structure is largely in place. The Dodd-Frank Wall Street Reform and Consumer Protection Act and a set of standards negotiated by global regulators have produced new rules and regulations that policymakers can now observe empirically to determine how this new structure is working. It is time for policymakers to assess the cumulative impact of the regulations on the condition of the financial system, economic growth, and all end-users of financial services, including consumers, small and large businesses, and investors. In implementing the new regulatory framework, did policymakers strike the right balance among these three factors?
America has a safer financial regulatory system than before the crisis, but there are some less-than-optimal outcomes.
The Bipartisan Policy Center’s Financial Regulatory Reform Initiative’s answer, in summary, is that Americans have a safer financial regulatory system than before the crisis, but there are some less-than-optimal outcomes and unintended consequences of post-crisis reform that warrant attention.
The financial system is safer than before the crisis. Financial institutions are better prepared to withstand future disruptions with higher capital, liquidity, and risk governance standards; and regulators are better able to manage the failure of large financial firms. Consumers, especially mortgage borrowers, are better protected from risky financial products through a series of new rules and actions by the new Consumer Financial Protection Bureau. Derivatives transactions are more transparent and safer due to margin and clearing requirements.
Over the past few months, BPC’s Financial Regulatory Reform Initiative has examined this question, paying attention to financial conditions for the consumers and businesses who rely on the financial system. We reviewed data on the condition of the financial system, credit flows, and economic growth. We complemented our research with more than 30 interviews of current and former regulators, consumer groups, market analysts, bankers, labor advocates, asset managers, and other experts to gauge the impact of post-crisis financial regulations.