Question

• Do you think that the financial system is now adequately regulated in the U.S.? Take a definitive yes or no position.
• What needs to be changed or what has fixed the past problems?

Answer 1

Laws governing banks, investment firms, and insurance companies are financial regulations. They are protecting you against financial risk and fraud. But they need to be balanced with the need to enable the efficient operation of capitalism.

Customers are protected from economic fraud by regulations. These include unethical mortgages and credit cards as well as other economic products. Effective oversight by governments prevents companies from taking excessive risks. Regulations would have kept off guard the failure of the Lehman Brothers to catch the government.

Laws such as the Sherman Anti-Trust Act discourage the abuse of their authority by monopolies. Unregulated monopolies are staggering prices, selling defective products, and stifling competition. A free market will generate asset bubbles without regulation. This happens when speculators sign up stock, housing, and gold prices. They generate crises and recessions when the bubbles burst.

Protection by the government can assist start some critical sectors. Electricity and cable sectors are examples. Without governments to shield them, companies would not invest in elevated infrastructure expenses. Regulations can safeguard tiny or new businesses in other sectors. Proper laws can promote innovation, competition and a greater selection of consumers.

Dodd-Frank is preventing the financial crisis of 2008 from repeating. It generates an agency to evaluate the financial industry's threatening hazards. It provides the power to control large banks to the Federal Reserve before they become "too big to fail." It controls hedge funds, derivatives and mortgage brokers. The Volcker Rule prohibits banks from owning hedge funds or using funds from investors for their own profit to trade derivatives. The CFPB was also developed by Dodd-Frank.