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reactions to pwg recommendations March 14, 2008

Posted by Bradley in : Uncategorized , trackback

The New York Times pans the PWG’s recommendations, pointing out that the recommendations rely on the existing structures and institutions which allowed the financial markets crisis to develop. The editorial ends:

Until the broad statements are backed up by firm detail – and a serious and urgent commitment to regulatory reform – the entire effort is more public relations than policy making.

This is clearly right – the details will matter. But it’s not surprising at multiple levels that the PWG would produce a rather predictable and unambitious set of proposals for financial market regulation at this point. For one reason, policy makers tend to take the view that one of the crucial objectives of financial regulation is maintaining confidence in the financial markets (fraud prevention is often justified by the need to maintain confidence rather than because fraud is inherently a bad thing). Appearing to be acting may be just as useful as acting in this confidence game. Plus there is a huge amount of lobbying energy directed to stopping regulation interfering with the markets – for all of the good and the bad that follows.

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