Ever since severe turmoil enveloped the financial markets in the fall of 2008, commentators have blamed deregulation of the financial system, and specifically the supposed "repeal" of the Glass-Steagall Act by the Gramm-Leach-Bliley Act of 1999,2 for the crisis. This has led many to advocate a...

In addition to their direct effects, episodes of financial instability may decrease investor confidence. Measuring the impact of a crisis on investor confidence is complicated by the fact that it is difficult to disentangle the effects on investor confidence from coincident direct effects of the...

Officials must show that they understand why and how the public's confidence in the federal government's ability to manage financial turmoil was lost. Leaders of the Treasury, Federal Reserve, and the U.S. Securities and Exchange Commission must face up to their institutions' roles in an...

This paper traces the financial institution crisis of 2007-2008 to a breakdown in the incentives of regulators, supervisors, managers, and investors to perform adequate due diligence on securitized investments. Investors allowed their trust in the reputations of credit rating firms and the giant...

On November 12, 1999, President Clinton signed the most significant piece of financial services regulation to be enacted since the Great Depression, at least up to that time. When the Financial Service Modernization Act of 1999, better known as the Gramm-Leach-Bliley Act (GLBA), was signed, the...

The causes of the financial crisis of 2007-09 are many and varied. Indeed, the crisis may be viewed as the product of a perfect storm. This paper identifies the major culprits or sinners of the U.S. crisis and enumerates their more important sins. The culprits include central bankers, commercial...

To be effective, programs of regulatory reform must address the incentive conflicts that intensify financial risk-taking and undermine government insolvency detection and crisis management. Subsidies to risk taking that large institutions extract from the financial safety net encourage managers...

As recovery from the present economic crisis begins, policymakers must address what reforms will be made in financial system in order to prevent the reoccurrence of a similar crisis in the future. What will Congress do in response? In terms of long-term financial reform, what is to be expected...

A dozen years ago, Randall Kroszner, soon to be one of George W. Bush’s economic advisors and a Governor of the Federal Reserve, could comment in a Levy Institute seminar, without fear of contradiction, that there was no evidence to back the "public interest rationale" for the separation of...