Section on Financial Institutions and Consumer Financial Services
Marina Salon E, South Tower/Level 3, San Diego Marriott Hotel & Marina
Does Modern Financial Institution Regulation Work? Reflections on Deregulation and Internationalization of Supervisory Standards
One or more presenters were selected from a call for papers.
Almost ten years ago, Congress passed the Gramm Leach Bliley Act of 1999 (GLB) and eliminated the regulatory barriers to the creation of financial conglomerates like Citigroup. Since that time, events like the implosion of Enron and WorldCom and the subprime lending crisis allow for an assessment of the benefits and costs of such deregulation. Did deregulation save an anachronistic industry or did it create opportunities for abuse? At the same time, the last ten years have seen the growing influence of international standards on domestic regulation. For example, the Basel Committee on Banking Supervision (BCBS) released its original capital accord in 1988 and a new Basel II capital accord becomes effective in the United States on April 1, 2008. Have our enormous investments in capital regulation and our increasing reliance on risk-based models paid off? Finally, the structure of agencies responsible for financial services regulation has been debated around the world with the popularity of the integrated financial services authority on the rise, but subject to criticism after the Northern Rock episode. The Treasury Department released recently its Blueprint for a Modernized Financial Regulatory Structure. While the Treasury’s Blueprint was a project originally undertaken in response to concerns over the competitiveness of U.S. financial markets, the Treasury’s proposal is now being considered in the context of the Federal Reserve’s unprecedented decision to open its discount window to investment banks (traditionally, the discount window has only been available to commercial banks) and to support JP Morgan Chase’s emergency acquisition of Bear Stearns. The Fed’s moves might be justified as a necessary step to curb the effects of the ongoing subprime crisis. Yet, what does the Fed’s intervention mean for the future regulation of investment banks? Will structural reforms abroad, the subprime crisis, and the Treasury’s Blueprint serve as an impetus for the United States to address its complex and, arguably, inefficient agency structure? We hope to address these and other related questions in a lively debate over the current state of financial regulation.
Business Meeting at Program conclusion.
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