Believe it or not, U.S. financial regulators don’t have to calculate the economic impact of the rules they write. It’s an omission they should correct before it becomes a serious obstacle to fixing the financial system.
In February, Mary Schapiro, chairman of the Securities and Exchange Commission, said the agency is looking for ways to rein in high-frequency traders. That is, the people who use computer algorithms to buy and sell derivatives at lightning speed to make instantaneous profits.
The derivatives industry is squeezing Washington like a python. Desperate to control the tone and thrust of derivatives regulation, industry lobbyists have been swarming over the Commodity Futures Trading Commission and the Securities and Exchange Commission, each of which is writing derivatives rules as mandated by the Dodd-Frank reform law.
In the span of one week, Democrats went from dismissing the possibility that the Supreme Court would strike down the 2010 law mandating individuals to buy health insurance to consoling themselves that any such action would have a silver lining.
There is little doubt that the U.S. housing market is hurting; the latest S&P Case-Shiller index shows residential values declined 4.2 percent in the first quarter compared with the previous three months.
With the U.S. economy yielding firmer data, some researchers are beginning to argue that recoveries from financial crises might not be as different from the aftermath of conventional recessions as our analysis suggests. Their case is unconvincing.