The Rule of Law in the Financial System
Felix Salmon has a depressing blog post about the Fab Tourre verdict and a criminal conviction in another Goldman Sachs-related case. Felix concludes, "I’m increasingly coming to the conclusion that America’s system of jurisprudence simply isn’t up to the task of holding banks and bankers accountable for their actions."
Felix's observation underscores that we cannot and will not see sufficient and durable financial regulatory reform without political reform. This core Brandeisian insight (e.g., Other People's Money) has been lost during the course of the 20th century and its turn to technocratic financial regulation. (Add two parts capital and one part co-cos, mix with risk retention requirements and garnish with macroprudential regulation...) Notice that the one piece of the Dodd-Frank Act that changed the politics of financial regulation--the CFPB--is also where the pushback has been the strongest. We need to stop seeing financial regulation as a matter of technocracy and start seeing it as a matter of political importance of the first order. At stake is nothing less than the rule of law.