Financial Re-Regulation and Democracy

NEW YORK – It has taken almost two years since the collapse of Lehman Brothers, and more than three years since the beginning of the global recession brought on by the financial sector’s misdeeds for the United States and Europe finally to reform financial regulation.

Perhaps we should celebrate the regulatory victories in both Europe and the United States. After all, there is almost universal agreement that the crisis the world is facing today – and is likely to continue to face for years – is a result of the excesses of the deregulation movement begun under Margaret Thatcher and Ronald Reagan 30 years ago. Unfettered markets are neither efficient nor stable.

But the battle – and even the victory – has left a bitter taste. Most of those responsible for the mistakes – whether at the US Federal Reserve, the US Treasury, Britain’s Bank of England and Financial Services Authority, the European Commission and European Central Bank, or in individual banks, have not owned up to their failures.

Banks that wreaked havoc on the global economy have resisted doing what needs to be done. Worse still, they have received support from the Fed, which one might have expected to adopt a more cautious stance, given the scale of its past mistakes and the extent to which it is evident that it reflects the interests of the banks that it was supposed to regulate.