regulating financial markets protecting us from ourselves and others

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1、CHAPTER48REGULATINGFINANCIALMARKETS:PROTECTINGUSFROMOURSELVESANDOTHERS∗MeirStatmanThecurrentglobalfinancialandeconomiccrisishighlightstheongoingtug-of-warbetweenthosewhopulltowardfreemarketsandthosewhopulltowardstrictregula-tionofmarkets—betweenthosewhopulltowardlibertarianismandthosewhopullt

2、owardpaternalism.Risingstockmarketsandeconomicprosperityempowerthosewhofavorfreemarketsandlibertarianism;stockmarketcrashesandeconomicrecessionsempowerthosewhofavorstrictregulationandpaternalism.Thisarticlediscussesthecurrentcrisisagainstthebackdropofearliercrisesandfocusesonmarginregulation

3、s,whichlimitleverage;suitabilityregulations,whichrequireprovidersoffinancialproductstoactintheinterestsoftheirclients;blue-skylaws,whichprohibitsecuritiesdeemedunfairorundulyrisky;andmandatory-disclosureregulations,whichrequireprovidersoffinancialproductstodisclosepertinentinformationevenifpot

4、entialbuy-ersdonotaskforit.Anydoubtsthatfinancialmarketsareglobalandthatactionsbyoneinstitutioncanbringdownothershavesurelybeendispelledbythecurrentandstillunfoldingfinancialcrisis.Anydoubtsthatfinancialmarketsarebuiltonconfidenceandtrusthavebeendispelledaswell.ThecrisishasbroughtthedemiseofLehm

5、anBrothers;theU.S.government’srescueofFannieMae(FederalNationalMortgageAssociation),FreddieMac(FederalHomeLoanMortgageCorporation),andAIG(AmericanInternationalGroup);andthedisappearanceofBearStearns,MerrillLynch&Co.,andWachoviaCorporationasindependentcompanies.∗ReprintedfromtheFinancialAnaly

6、stsJournal(May/June2009):22–31.701CH048.indd7018/28/108:51:23PM702PartIII:ManagingRiskNonfinancialRiskThebankruptcyofLehmanBrothersslashedtheassetsoftheReservePrimaryFund,theoldestmoneymarketfund,forcingthefundto“breakthebuck”andunderminingconfidenceandtrustinallmoneymarketfunds.InearlyOctober

7、2008,centralbanksintheUnitedStates,theUnitedKingdom,Europe,andChinareducedinterestratestobolsterlendingandreas-sureinvestors,butthesereductionsfailedtohalttheglobalslideinstockprices.AccordingtoHilsenrath,Perry,andReddy(2008):Lowerinterestratesredu