Are Post-Crisis Financial Regulations ‘Cumulatively Counter-Productive’?
By Michael Ide
Eight years after the financial crisis it’s striking that the financial reforms that are supposed to prevent another near collapse have yet to be finalized, and that Federal Financial Analytics has just released what it calls ‘intermediate term success analytics’ for the regulations that have been put into place. Just like it’s impossible to reach any serious conclusions based on counterfactuals (where would we be now if the US hadn’t used QE?), it’s impossible to judge a regulatory framework by the crises that it prevents. The best you can do is look at changes in overall liquidity, ask whether risky behavior has been reduced or merely shifted elsewhere, and financial markets ability support growth. By these measures, FedFin finds the current regulatory framework lacking and speculates that the sum total of new banking rules could even be ‘cumulatively counter-productive’.