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The Geithner Proposals--Skeel

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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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?

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.