Posted by Pete Davis
This afternoon, the American Enterprise Institute held two high quality panel discussions that were quite critical of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act. While many of their criticisms seemed valid to me, I couldn't accept their conclusions that we can't anticipate future financial crises and that most could be avoided if we just kept a tighter rein on monetary policy when the economy is strong. I found the contention that system risk wouldn't exist if we just let failing institutions fail to be very 19th century, when we had a financial crisis every ten years or so. Nor could I accept their dismissal of predatory lending as something mostly concentrated in the Federal Housing Administration. You don't have to spend much time on the poor side of town before you become quite convinced of the need to better protect against financial predators.
I always find Vince Reinhart's comments to be particularly worth my attention. His long experience at the Fed showed, particularly when he said he didn't want a macroeconomists running banks. He clearly sketched the findings of his wife, Carman Reinhart, and Ken Rogoff that leverage goes up before a financial crisis and then it takes seven years on average to wind down. Then he and other speakers made a convincing case that Dodd-Franks' building bureaucracy on top of bureaucracy will do a lot more to increase bureaucratic infighting that it will to avert the next financial crisis. The speakers also dug into detail about how difficult it will be for our financial regulators to produce over 160 regulations in a very short time. I think it was George Mason Law Professor Todd Zywicki's cry, "I'm sick of the government picking winners and losers." that struck me the most. Then there are the false premises underlying key provisions of the bill and the unintended consequences.
The speakers list is
here, and the video will be posted soon.
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Were were the financial
Were were the financial historians? Charles Calomiris, Richard Sylla, Eugene White, to name a few? I realize that they might have been asked but turned it down, but there are a lot of names I can think of that would have added a historical dimension to the discussion and that could have pointed out why these attempts have either succeeded or failed in the past.
financial historians
Good point.