Opinion | Editorials
Too little, too late for a turnaround
It can never be guaranteed that a credit crunch in the US will not happen again.
- Gulf News
- Published: 00:01 April 2, 2008
The US Treasury's proposals to reform the financial regulatory system might appear to the casual observer to be a case of shutting the stable door after the horse has bolted.
It will anyway take time to implement, having to overcome obstacles in Congress, and from the vested interests in banking. And very few could properly discern whether the basic ideas, namely to consolidate regulators into fewer bodies with heightened powers (with the Federal Reserve in the role of supercop), will eventually provide the desired solution.
Ironically, the original motivation for this review had been to see whether regulation might be eased rather than stiffened, owing to the US's apparent competitive disadvantage.
That thought has been rapidly overtaken by the possibility of wholesale implosion of the banking system, making it everyone's problem, since the financial industry is not just another sector, but the means of translating purely monetary demand into real economic activity.
It can never be guaranteed that a credit crunch will not happen again, since it is a feature of market behaviour that fortunes not only fluctuate, but can run to dramatic excesses. But, since there is always a surrounding institutional framework, tightening the regulatory belt surely seems overdue.
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