The Obama administration and Democrats always attempt to undertake measures to prevent future financial meltdowns. They feel they are expert in their attempts to regulate whatever is required to maintain financial stability.
The Dodd-Frank Act of 2010 is a prime example.
However, suggested remedies will fail. All they will accomplish is the message that Washington is doing something. In that respect, politicians are doing what is expected politically by uninformed masses. But financially, government will be making a mess of things.
By creating super regulation, all the bureaucrats set up are moral hazards. They give investors ill-conceived confidence that markets are mistakenly being well supervised and secure. So investors will take bigger risks.
Regulators give investors the impression the latter will be bailed out if the financial system runs into a debacle. The ever-bigger-risk cycle will continue.
Moral hazards are what helped the recent financial meltdown to occur, with institutions “too big to fail.” So-called “bailouts” did not work as promised. The new regulations will still exaggerate problems. ( See the Earl J Weinreb NewsHole® comments.)
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