US must completely rethink financial regulations, academics say

The question should no longer be about more or less regulation

By Francis Monfort

09 Jul 2018

The US must completely rethink how it regulates investing instead of focusing on the question of whether there is a need for more or less regulation in order to prepare for the next big crash, according to a pair of academics.

In an article for The Conversation, West Virginia University law professor Jena Martin and public administration professor Karen Kunz argue that regulations set in place are not enough to protect the US in the future. Additionally, the writers say that Democrats and Republicans are both missing the point when it comes to regulation.

“If we had our way, the whole system of financial regulation would be burned to the ground and replaced with something entirely different,” the authors said.

Their comments follow the recent rollback by Republicans of certain regulations on Wall Street passed following the 2008 financial crisis. Although the changes did not fully repeal regulations, the Dodd-Frank modifications are the first legislative overhaul since 2010.

Martin and Kunz argue that following the next financial crisis, institutions will no longer be “too big to fail” but will be “too big to save.” They view Dodd-Frank merely as an extension of an existing patchwork structure. While recent legislation will not make things worse, the writers say Republican lawmakers are looking to repeal what remains of the law. This would bring banks to the self-regulation status before the crisis.

“In sum, what we have is a regulatory system that fails in its mission to protect investors,” the writers said. “The structure used to oversee current investment practices, corporate disclosures, product development, and technological advances is based on the market failures of 1929. It’s a bit like trying to surf the internet using a typewriter.”