Financial Armageddon Routs Law Again

52 Pages Posted: 10 Aug 2013 Last revised: 28 Sep 2013

Nicholas L. Georgakopoulos

Indiana University - Robert H. McKinney School of Law

Date Written: August 10, 2013

Abstract

This essay, after highlighting the unique aspects of financial markets, offers a mostly rational account for financial crises, centering on the 2008 crisis as an example. Market participants may overestimate the duration of high productivity growth due to new technologies and produce occasional — and likely unavoidable — bubbles. Considering potential changes in the regulation of financial markets, the conclusion is grim. Regulators have exhausted the effective legal levers against overestimations of continued high growth. The legislative responses to the last few crises were unproductive and pro-cyclical whereas public finance needs a counter-cyclical approach, souring euphorias and enthusing out of slumps. A meaningful improvement would be the constitutional movement of financial legislative authority to a body with the independence to be counter-cyclical.

Keywords: Financial Crisis, Bubbles, Irrationalities, Great Recession, Dodd-Frank, Euphorias, Bank runs

JEL Classification: G18, G28, K23

Suggested Citation

Georgakopoulos, Nicholas L., Financial Armageddon Routs Law Again (August 10, 2013). UC Davis Business Law Journal, Forthcoming; Indiana University Robert H. McKinney School of Law Research Paper No. 2013-31. Available at SSRN: https://ssrn.com/abstract=2308382 or http://dx.doi.org/10.2139/ssrn.2308382

Nicholas L. Georgakopoulos (Contact Author)

Indiana University - Robert H. McKinney School of Law ( email )

530 West New York Street
Indianapolis, IN 46202
United States
317-274-1825 (Phone)

HOME PAGE: http://www.nicholasgeorgakopoulos.org

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