Krugman: Financial Reform Needs Harsher Bite

Thursday, 15 Apr 2010 08:29 AM

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
How good is the financial reform legislation presently on the table? Not very, says economist Paul Krugman, who believes bill falls far short of what it needs to be.

"It's a good-faith effort to do what needs to be done, but it would create a system highly dependent on the wisdom and good intentions of government officials," Krugman says.

"And as the history of the last decade demonstrates, trusting in the quality of officials can be dangerous to the economy's health," he recently wrote in The New York Times.

Krugman acknowledges the impossibility of devising a truly foolproof regulatory regime.

“Anyone who believes otherwise is underestimating the power of foolishness,” he says. “But you can try to create a system that’s relatively fool-resistant. Unfortunately, the Dodd bill doesn’t do that.”

The problem of “too big to fail” has gotten most of the attention, Krugman notes — and while big banks deserve all the contempt they’re getting, the core problem with our financial system isn’t the size of the largest financial institutions.

“It is, instead, the fact that the current system doesn’t limit risky behavior by ‘shadow banks,’ institutions — like Lehman Brothers — that carry out banking functions, that are perfectly capable of creating a banking crisis, but, because they issue debt rather than taking deposits, face minimal oversight,” Krugman says.

The Securities and Exchange Commission has announced it has begun an inquiry into two dozen financial companies to determine whether they followed accounting practices similar to those recently disclosed in an investigation of Lehman Brothers, The Christian Science Monitor reports.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Kidnappers Threatened Foley After Ransom Demands Failed

Wednesday, 20 Aug 2014 22:36 PM

The chief executive officer of a Boston-based news organization says James Foley's kidnappers last week threatened to ki . . .

Holder Meets Ferguson Residents in Bid to Quell Days of Unrest

Wednesday, 20 Aug 2014 20:31 PM

 . . .

Officer Who Pointed Gun at Protesters Suspended

Wednesday, 20 Aug 2014 18:26 PM

Officials say a police officer who was part of the effort to keep peace during protests in Ferguson has been suspended f . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved