“NO ONE is happy,” says Paul Volcker, a former chairman of the Federal Reserve, referring to the chaotic, overlapping and unaccountable sprawl of government agencies regulating America’s financial institutions. This week a group of wise men he assembled released a plan to reshape it. He would like to abolish one agency, merge some others and provide some checks on the growing power of the one he used to run.
Mr Volcker concedes that the odds are against him. Since the second world war, he says, more than 25 attempts to overhaul the regulatory shambles have failed. Politicians, alas, tend to respond to flaws by creating new bodies, without abolishing the old ones. The Dodd-Frank reforms adopted in 2010 in response to the financial crisis, for example, created a new consumer-protection agency and a new committee to monitoring financial stability.
Dodd-Frank also gave more power to the Fed, expanding its role in bank supervision in particular. The Fed has become more involved in markets too; efforts to revive the economy through asset purchases hugely expanded its balance-sheet. Complaints about its meddling are legion.
In a small country, Mr Volcker says, a central bank can take responsibility for monetary policy, the drafting of regulations and the supervision of financial institutions. But he does not think that will work in America. The Fed, he...
from The Economist: Finance and economics http://ift.tt/1DmQVCp
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