Felix Salmon

The upside of regulatory paralysis

By Felix Salmon
September 27, 2009

Joe Nocera explains one downside to having a single powerful regulator:

Our problems would have been much, much worse if we had implemented Basel II. I guess this is one of those times when the paralysis created by all our overlapping bank regulators saved us.

This is true: power can always be used for good or for ill, to regulate or to deregulate, to give the banks more of what they want, or less. But that doesn’t mean that paralysis is a good thing. It just means that governments have to be super-careful not to let regulators be captured by the banking industry. Which, in places like New York and London, is much easier said than done.

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