Working Paper: NBER ID: w17443
Authors: Alejandro Komai; Gary Richardson
Abstract: In the United States today, the system of financial regulation is complex and fragmented. Responsibility to regulate the financial services industry is split between about a dozen federal agencies, hundreds of state agencies, and numerous industry-sponsored self-governing associations. Regulatory jurisdictions often overlap, so that most financial firms report to multiple regulators; but gaps exist in the supervisory structure, so that some firms report to few, and at times, no regulator. The overlapping jumble of standards; laws; and federal, state, and private jurisdictions can confuse even the most sophisticated student of the system. This article explains how that confusion arose. The story begins with the Constitutional Convention and the foundation of our nation. Our founding fathers fragmented authority over financial markets between federal and state governments. That legacy survives today, complicating efforts to create a financial system that can function effectively during the twenty-first century.
Keywords: No keywords provided
JEL Codes: G01; G2; G21; G22; G28; N2; N21; N22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fragmented regulatory authority (L98) | financial instability (F65) |
| fragmented regulatory authority (L98) | confusion among financial institutions (G21) |
| confusion among financial institutions (G21) | regulatory arbitrage (G18) |
| Glass-Steagall Act (G28) | improved financial stability (G28) |
| nationwide deposit insurance (G28) | reduced bank failures (G28) |