21. The Global Financial Crisis and Obstacles to U.S. Leadership
- Author:
- David Singer
- Publication Date:
- 10-2008
- Content Type:
- Working Paper
- Institution:
- MIT Center for International Studies
- Abstract:
- The regulatory environment in the U.S., however, is likely to change. The Treasury’s blueprint calls for the disman- tling of OTS, the enhancement of the Fed’s supervisory authority, and the creation of a national insurance regulator to replace the 50 separate regulators. Regulatory consolida- tion in the U.S. might be the most important catalyst for the creation of new international regulatory standards in banking. Consider the immense challenges of creating a global standard—which most likely cannot occur without U.S. support—when the agencies within the U.S. are at odds with one another! Ironically, U.S. investment banks themselves may have cleared one obstacle to international coopera- tion: the remaining free-standing securities firms (Goldman Sachs and Morgan Stanley) have opted to transform themselves into bank holding companies. This move reduces the SEC’s influence and gives the Fed a more uniform role in supervising financial institutions. Nevertheless, there is still consider- able fragmentation in the regulation of a range of activities that clearly have an important bearing on the stability of the banking system. If today’s financial crisis triggers the institutional consolidation of domestic financial regulation, then fruitful international negotiations will be more likely in the future. But until such consolidation occurs, the welter of U.S. regulatory agencies will face considerable obstacles in addressing the complicated inter- actions between banking, disintermediation, and capital markets that are at the root of today’s financial crisis. And the fragmentation of accountability among regulators and policymakers will continue to hamper U.S. leadership in preventing such a terrible crisis from happening again.
- Topic:
- Governance, Regulation, Financial Institutions, and Banking
- Political Geography:
- North America and United States of America