More regulation for US banks


The US Treasury announced plans for greater regulation of financial institutions this week, in the wake of the sub-prime mortgage debacle and the credit crunch. Plans include the federal regulation of the insurance industry and establishing a Mortgage Origination Commission to pass judgement on state over the mortgage industry.

Critics are describing the plans as too little too late. Nobel Prize winning economist Joseph Stiglitz said that regulatory failures were to blame for the current problems, particularly the Federal Reserve “which flooded the market with liquidity, which did not bring regulations until after the crisis.”

Discussing the moves in the New Zealand Herald on Wednesday 2 April, Fran O’Sullivan said that like the USA, private lending in New Zealand had got out of control. She said that “Bankers took leave of common sense through issuing loc doc loans to consumers who did not stand a chance of funding their positions…Financial institutions were not held to account for their own disclosure practices – it has been up to consumers to check out the health of their lenders.”


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