Treasury Secretary Geithner finally sketched out the administration's blueprint for new financial regulation yesterday. Many of the proposals, such as a new registration requirement for hedge funds, strike me as sensible. But I think the proposal to give federal regulators the power to take over troubled investment banks and hedge funds is a serious mistake. A colleague and I criticise the proposal in this op-ed piece.
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The Geithner Proposals--Skeel
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Comments ( 2 )
Thanks, this is helpful.
What are the alternatives? I heard a professor suggest that the fact that we have companies that are "too big to fail" means there has been a failure of antitrust enforcement. Agree? If so, is it too late for this option to work?
Posted by Jason | March 27, 2009 10:52 AM
I do tend to think there has been too little focus on the extent to which having a small handful of dominant, interconnected investment banks and other financial institutions has contributed to the crisis. If financial derivatives were not so concentrated in a few institutions, for instance, I think the problems would no have been so severe. I don't think it's possible to turn back the clock altogether, but there may be things regulators could do to reduce the concentration, such as regulating derivatives in a way that reduces the incentives for the handful of dominant counterparties to deal only with one another.
Posted by David Skeel
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March 28, 2009 11:47 AM