Has there been a proper balance between the need for reform and the need for banks to be able to lend to corporations?
Just as it's problematic when banks extend too much or too easy credit to individuals, creating a credit bubble, the same kinds of things can happen with companies. I'm not sure that this financial reform will dramatically increase corporate borrowing costs. Some people have raised that as a significant problem and it may be true, by making certain kinds of credit more expensive under the consumer-protection side of the legislation. But I don't see it as being a disastrous, sky-is-falling scenario for companies.
Is it realistic to hope that regulatory reform, done properly, could prevent another crisis from happening again?
I don't think there's any way to eliminate these crises. Historically we've always had them, and we always will. We can use the regulatory system to try to dampen them and then prolong the steady growth periods that follow. We had several decades of solid growth with a robust, strong financial and regulatory system after the last major crisis in 1929. It was only during the past 15 years that the financial system has become unmoored and out of control. If we understood the causes of interconnected crises, it's possible to address them through financial reform and buy ourselves another round of decades of robust economic growth. But I'm afraid we're not doing that with this legislation.
So you think we'll see more rounds of regulatory reform in the near future?
I think we'll see this legislation pass. Then either that will be it, or another major shoe will drop in the next year or so.
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