Opinion: A new approach to financial regulation
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Lo_Opinion.pdf
Size
1.09 MB
Format
Adobe PDF
Checksum (MD5)
20ddf360e8a81b78d860e62bdc00dd01
Author(s)
Levin, Simon A.
Lo, Andrew W
Date Issued
October 2015
Journal
Proceedings of the National Academy of Sciences
Publisher
National Academy of Sciences (U.S.)
Citation
Levin, Simon A. and Lo, Andrew W. “Opinion: A New Approach to Financial Regulation:” Proceedings of the National Academy of Sciences 112, no. 41 (October 2015): 12543–12544. © 2015 National Academy of Sciences
Version
Final published version
Abstract
It has been five years since the US Congress enacted the landmark Dodd–Frank Wall Street Reform and Consumer Protection Act; and despite the fact that about 20% of the Act has yet to be implemented (1), several legislative initiatives are now attempting to soften or roll back key provisions. This pattern of regulatory action and reaction is not new. The financial excesses of one period often lead to asset bubbles that burst, ushering in a new period of much greater regulation. This, in turn, is systematically weakened over time as markets recover and we forget the reasons why we imposed such stringent regulations in the first place. Even before Dodd–Frank, the financial industry was among the most highly regulated of industries in the world. However, the many layers of regulation and multiple regulatory agencies were insufficient to prevent financial crisis. Why?
MIT Department
MIT Laboratory for Financial Engineering
Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1073/pnas.1518385112
