Is something missing from the U.S. regulatory toolbox?
By John Heltman
As U.S. regulators take steps to rightsize the post-crisis regulatory regime — emphasizing risks posed by the largest institutions and tailoring rules for smaller firms — a key bloc of the regulatory brain trust still sees a weakness in its tool chest. …”There is no prudential regulatory authority outside the states over any nonbank lender, and state authority is very limited,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics. “Not only can bank regulators not meaningfully address emerging risks, but when they occasionally attempt to do so through the banking system, they create an asymmetric regulatory framework that does nothing but move the market into even riskier hands.”