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New Directions in Financial Services Regulation$
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Roger B. Porter, Robert R. Glauber, and Thomas J. Healey

Print publication date: 2011

Print ISBN-13: 9780262015615

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262015615.001.0001

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Comments by Howell E. Jackson

Comments by Howell E. Jackson

Chapter:
(p.115) Comments by Howell E. Jackson
Source:
New Directions in Financial Services Regulation
Author(s):

Roger B. Porter

Robert R. Glauber

Thomas J. Healey

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262015615.003.0010

This chapter discusses the diagnosis of the economic crisis presented by previous chapters. The chapter first argues against the statement that the Glass-Steagall Act disrupted the period of financial stability between the 1930s to the early 1980s. The chapter then goes on to explain that the decision to allow the market in over-the-counter derivatives to balloon without any public oversight was a public-policy error of the first order. Therefore, the Glass-Steagall act was not a principal cause of the recent crisis. The chapter then discusses the problem of money-market mutual funds, which is viewed to have become a source of systemic risk that warranted action from the Department of the Treasury. The chapter goes to outline some theories and examples for how to balance these risks. The chapter ends with the imperative that practicing finance is more important than simply regulating finance. Hence, effective financial oversight is a necessity.

Keywords:   money-market mutual funds, systemic risk, Department of the Treasury, practicing finance, effective financial oversight, Glass-Steagall Act

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