To Regulate or Not to Regulate: Balancing Moral Hazard and Consumer Protection
Posted February 04, 2010
After the recent financial debacle, a simple story emerged about the causes and cures for one of the biggest market crises in modern history: decades of deregulatory policy removed safeguards that had been in place since the Great Depression, leaving global financial markets vulnerable to catastrophe. The solution, clearly, is to re-regulate the markets.
The story seems compelling at first glance, but it drastically oversimplifies the situation. At the December 3, 2009, meeting of the New York Academy of Sciences' Quantitative Finance Discussion Group, two leading experts presented the arguments for and against increased market regulation and highlighted some steps the Federal Reserve Bank took at the height of the crisis. Afterward, the audience participated in a lively discussion of the problem, highlighting the pitfalls of both pro-regulatory and anti-regulatory approaches.
Use the tabs above to find a meeting report and multimedia from this event.
Meltzer AH. 2004. A History of the Federal Reserve, Volume 1: 1913-1951. University Of Chicago Press, Chicago, IL.
Meltzer AH. 2010. A History of the Federal Reserve, Volume 2, Book 1, 1951-1969, 1st ed. University Of Chicago Press, Chicago, IL.
Ashcraft AB, Schuermann T. 2008. Understanding the securitization of subprime mortgage credit. Foundations and Trends® in Finance: 2: 191-309. http:/dx.doi.org/10.1561/0500000024
Kambhu J, Schuermann T, Stiroh KJ. 2007. Hedge funds, financial intermediation, and systemic risk. FRBNY Economic Policy Review (December; PDF, 167 KB)
Kuritzkes A, Schuermann T. 2008. What we know, don't know, and can't know about bank risk: A view from the trenches. In Diebold FX, Doherty N, Herring RJ (eds.) The Known, The Unknown and The Unknowable in Financial Risk Management, Princeton University Press, Princeton, NJ. (PDF, 190 KB)
Allan Meltzer, PhD
Allan H. Meltzer is an American economist and professor of Political Economy at Carnegie Mellon University's Tepper School of Business in Pittsburgh, Pennsylvania. He is the author of dozens of academic papers and books on monetary policy and the Federal Reserve Bank, and is considered one of the world's foremost experts on the development and applications of monetary policy. His book A History of the Federal Reserve is considered the most comprehensive history of the central bank. He is currently at work on Volume II of his History of the Federal Reserve Bank, which covers the years since the Federal Reserve accord in 1951 to the mid-1980s. Meltzer is considered to have originated the aphorism, "Capitalism without failure is like religion without sin. It doesn't work."
Til Schuermann, PhD
Til Schuermann is a vice president in the Financial Intermediation Function at the Federal Reserve Bank of New York. His research focuses on risk measurement and management in financial institutions and capital markets, and he has published in a variety of journals including the Journal of Financial Economics and the Review of Financial Studies. He is also a Sloan Research Fellow at the Wharton Financial Institution Center and an associate editor for the Journal of Financial Services Research and the Journal of Risk. Prior to joining the New York Fed, he was a Director and Head of Research at the management consulting firm Oliver, Wyman & Company. From 1993 to 1996 he was at Bell Laboratories.
Alan Dove is a science writer and reporter for Nature Medicine, Nature Biotechnology, and Bioscience Technology. He also teaches at the NYU School of Journalism, and blogs at http://dovdox.com.