U.S. system designed to prevent financial crisis ‘likely to fail,’ say experts

“The current U.S. institutional set-up is likely to fail in a crisis, and will be doing less to prevent a crisis than it should be,” said Adam Posen, president of the Peterson Institute for International Economics, at a two-day conference on financial stability sponsored by the Boston Federal Reserve.

Posen said that U.S. regulators, including the Fed, don’t have the tools or the mandates from Congress that they need.

Posen was especially critical of the umbrella group of regulators, the Financial Stability Oversight Council, that was set up by Dodd Frank to identify and deal with financial stability risks.

“To me, the FSOC is a mess,” Posen said.

Mervyn King, the former head of the Bank of England, agreed that the U.S. institutional structure was a problem.

Kohn said there is a widespread perception in Washington that the Fed is responsible for financial stability, but said in reality the Fed must work in a “Balkanized” regulatory system.

He agreed that FSOC “cannot remedy the underlying flaws of financial regulation in the U.S.”

Full article: U.S. system designed to prevent financial crisis ‘likely to fail’ say experts (MarketWatch)

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