What have you always wondered about the economy? Tell us

Avoiding the ‘regulatory capture’ trap

Tracey Samuelson Nov 21, 2014
HTML EMBED:
COPY

Avoiding the ‘regulatory capture’ trap

Tracey Samuelson Nov 21, 2014
HTML EMBED:
COPY

Another day, another Senate hearing on the financial industry.

The man in the hot seat today: New York Federal Reserve President William Dudley. He was grilled about something called “regulatory capture,” the idea that regulators can be “captured” or overly influenced by the people and companies they’re supposed to oversee. Dudley said the banking system is safer now than six years ago. Separately, the Fed has announced a review of its bank supervision programs.

Sid Shapiro, a professor at Wake Forest University, cautions that if regulators are too cozy with their charges, banks might get away with things they shouldn’t. Regulatory capture isn’t a problem unique to the Fed but its impact at the Fed can be especially dangerous and far-reaching, says Dan Carpenter, a Harvard University professor who studies the regulatory agencies. Lawrence Baxter, a professor at Duke University School of Law, says the Fed should be more transparent – and draw fewer of its employees from Wall Street. 

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.