Saturday, July 25, 2009

Behaviorally Driven Financial Regulation

It was widely reported during the US election that Obama is sympathetic to incorporating behavioural economics into policy making and the appointment of Cass Sunstein as the head of his Office of Information and Regulatory Affairs is indicative of this.

A recent debate in the US is very instructive to keep an eye on for those interested in the debate about behavioural economics and policy. There is currently a proposal to develop a new consumer protection agency aimed at home loans, credit cards and other financial products with powers well beyond those currently existing in the system. Industry representatives from many of the US's largest banks and financial agencies are pressing vigorously to kill this idea.

link here

As well as the industry disagreeing with this idea, the complexity of the various agencies overseeing financial regulation is also leading to turf wars emerging among the various agencies, as detailed in the NYT article below.

link here

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