Thursday, September 24, 2009

The Basel Rules & the Crisis

Here is (believe it or not!) a very illuminating blog discussion (illuminating blog discussions are a bit like black swans) regarding whether bank-capital regulations, even if they did help cause the crisis, can justly be blamed on the regulations themselves or on the bankers who took advantage of them to "leverage up." The discussion was prompted by my post here last week and was begun by Mike Konczal of the Atlantic business blog. All credit to him for pushing me on whether a regulatory inducement (as opposed to a command) constitutes a form of deregulation, not regulation.

Also relevant: an article on bank capital from today's Financial Times.

5 comments:

Adam Gurri said...

Illuminating blog discussions aren't as rare as you'd think. Just look at Alex Tabarrok and Tyler Cowen's discussion about the credit crunch from last October.

The blogosphere may be home to a lot of quick thoughts and snarks, but it often is a vibrant atmosphere in which to hold serious intellectual conversations.

Mupetblast said...

All credit to him for pushing me on whether a regulatory inducement (as opposed to a command) constitutes a form of deregulation, not regulation.

I think it depends on the condition present before the action took place. If the regulation beforehand constituted a command, then it can plausibly be seen as deregulation (reducing penalties, allowing for flexibility), though "re-regulation" might be a better term.

-Dain

Wayne Lusvardi said...

For related Amazon.com book review on critical role of Basel Accords see Wayne Lusvardi "You Can Never Go Wrong Blaming the French," a review of Rawi Abdelal, Capital Rules: The Construction of Global Finance (2007), at link below:

http://causesofthecrisis.blogspot.com/

Wayne Lusvardi said...

CORRECTION:
For a related book review on critical role of Basel Accords see: Wayne Lusvardi, “You Can’t Go Wrong Blaming the French: French Socialists, Not Wall Street, Caused Financial Meltdown, at Amazon.com
REVIEW OF: Rawi Abdelal, Capital Rules: The Construction of Global Finance (2007)

LINK:

http://www.amazon.com/Capital-Rules-Construction-Global-Finance/product-reviews/0674034554

QUALITY STOCKS UNDER 5 DOLLARS said...

Its one crisis after another alright.