The premise of the current financial regulatory reform is that the establishment missed the last bubble and, therefore, more power should be vested in the establishment to foresee and prevent the next one.
The premise of the current financial regulatory reform is that the establishment missed the last bubble and, therefore, more power should be vested in the establishment to foresee and prevent the next one.
This may seem redundant to the readers of this blog, but the next paragraph in the article offers the punchline: "But the bill doesn’t solve the basic epistemic problem, which is that members of the establishment herd are always the last to know when something unexpected happens."
ReplyDeleteBrooks, inexplicably offers a "solution" by Mankiw which requires regulators to add equity to financial institutions they believe are undercaptalized - which they failed to do the last time around! Using force to alter other people's voluntary transactions to your own benefit cannot be resisted. The power must be eliminated or offset with equally strong power centers.