Is system risk regulation even possible?

September 24, 2009

Arthur Levitt, former chairman of the SEC, wants a systemic risk regulator who can serve as an “early warning system” and “director appropriate regulatory agencies to implement action.” (This is his House Fin Serv testimony.) I am not sure, ultimately, even the WH thinks this kind of prescience is possible. Anyone who could do that should be running money rather than serving in government. Better to tweak capital and leverage rules and force the big banks to show how they could be unwound — the “living will” idea.

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