1. Comments on “Financial Regulation in a Changing World: Lessons from the Recent Crisis”

2. What Sort of Regulatory Reform? More regulators? More dynamic regulators? More forward-looking regulators? A different organisation of regulation? More transparency and accountability in regulation? A clearer understanding of the line of accountability?

3. There may be good reasons why one size does not fit all The experience of the crisis does not prove that one form of regulatory architecture dominates all others. The UK reforms are not about making that assertion, but rather about creating a system in which risks to the financial system are at the forefront of supervisory action.

4. The Absence of Effective Market Discipline is a Major Issue Key issue here is the absence of effective resolution tools for all banks. Without that we don’t get away from Too Big To Fail. And this must influence the form of regulation because of the public money dependency.

5. More Root Cause Assessment There is a danger that we miss an important part of the diagnosis by focusing too narrowly on the immediate causes of the crisis. One of the neglected areas is the conflict of public policy objectives.

6. US Homeownership (Homeownership rate as a percentage of total occupied housing units)

7. The Focus of Financial Regulation should be on the Stability of the Financial System With monetary policy, low inflation is recognised as the pre-requisite of stable growth (established in the statutory objective in the UK) But that emphasis was not always present.

8. Getting a Proper Focus on Financial Stability (the example of monetary policy) “The underlying trend of costs and prices thus is still clearly upward, and inflation must remain a major consideration in formulating public policy. “ (Arthur Burns) “It had been our report to this committee that with the strategic policies being put into place involving fiscal discipline, involving incomes policy, involving dollar and international account policies, involving energy policies, and involving monetary policies we would wring out inflation over 5, 6, or 7 years. “ (William Miller) “As part of the process of restoring price stability, as I see it, this continuing effort reflects not simply a concern about the need for greater monetary and price stability for its own sake critical as that is. The experience of the Seventies strongly suggests that the inflationary process undercuts efforts to achieve and maintain other goals, expressed in the Humphrey-Hawkins Act, of growth and employment.” (Paul Volcker)

9. Financial Stability isn’t easy “There is a sort of paradox where, on the one hand, we want people to have access to credit. Credit allows you to buy a home much earlier than you otherwise could, for example.” (Ben Bernanke) “Thirty years ago was the creation of the Community Reinvestment Act, the premise of which was to address the fact that banks were not lending in certain neighborhoods, there was red lining and that it was important to extend credit to low and moderate income people. The development of the sub-prime lending market made that feasible to a significant extent. And I agree with you that legitimate, well underwritten, well managed sub-prime lending has been constructive. It does give people better access to credit and better access to home ownership.” (Ben Bernanke)

10. The role of Financial Stability Establishing the need for greater financial stability for its own sake critical as that is. But: – Competing public policy objectives; and – Understanding the transmission mechanism of macro-prudential policy.