Download this Paper Open PDF in Browser

Reframing Financial Regulation

50 Pages Posted: 11 Aug 2009 Last revised: 17 Feb 2010

Charles K. Whitehead

Cornell Law School

Date Written: February 15, 2010

Abstract

Financial regulation today is largely framed by traditional business categories. The financial markets, however, have begun to bypass those categories, principally over the last thirty years. Chief among the changes has been convergence in the products and services offered by traditional intermediaries and new market entrants, as well as a shift in capital-raising and risk-bearing from traditional intermediation to the capital markets. The result has been the reintroduction of old problems addressed by (but now beyond the reach of) current regulation, and the rise of new problems that reflect change in how capital and financial risk can now be managed and transferred.

In this Article, I begin to assess the current U.S. approach to financial regulation, in light of recent changes in the financial system, and offer a tentative way forward to address gaps in proposals for regulatory reform. Regulators must focus on the principal problems that financial regulation is intended to address – relating to financial stability and risk-taking – without regard to fixed categories, intermediaries, business models, or functions. Doing so, however, requires a prospective assessment of the markets, a different approach from the reactive process that characterizes much of financial regulation today.

Keywords: financial regulation, financial crisis, credit crisis, derivatives, hedge funds, AIG, Bear Stearns, money market funds

JEL Classification: G18, G28, G38, K22

Suggested Citation

Whitehead, Charles K., Reframing Financial Regulation (February 15, 2010). Boston University Law Review, Vol. 90, No. 1, 2010; Cornell Legal Studies Research Paper No. 09-026. Available at SSRN: https://ssrn.com/abstract=1447424

Charles K. Whitehead (Contact Author)

Cornell Law School ( email )

Myron Taylor Hall
Ithaca, NY 14853
United States

Paper statistics

Downloads
1,346
Rank
11,059
Abstract Views
6,441