Intrinsic Imbalance: The Impact of Income Disparity on Financial Regulation

28 Pages Posted: 29 Jan 2014 Last revised: 28 Dec 2014

Date Written: February 14, 2014

Abstract

As part of a symposium on the administrative law of financial regulation, this article shows that there is a two-to-one income disparity between members of the financial industry and their regulators. When this income disparity — which dwarfs that between other industries and their regulators — is coupled with the complexity of financial products and markets, it creates an information asymmetry that can lead to regulatory failure. Although scholars have long observed the existence of an information asymmetry between regulators and industry due to delays in obtaining information, this income disparity creates an additional, and very different, information asymmetry: one based not on obtaining but on processing information.

Suggested Citation

Schwarcz, Steven L., Intrinsic Imbalance: The Impact of Income Disparity on Financial Regulation (February 14, 2014). Law and Contemporary Problems, Vol. 78, No. 1, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2387020

Steven L. Schwarcz (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7060 (Phone)
919-613-7231 (Fax)

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