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Commentary

How the Fed Contributes to Crises

The government's actions before the crisis and after it began are troubling, our distinguished panel says.

The financial crisis that has so significantly undermined economic and investment confidence in many corners of the markets had some very important regulatory underpinnings. In reflecting on the crisis and its causes, we have to question whether those institutions we've created to help "stabilize" banking markets and to "protect investors" have actually done what they advertise both heading into the crisis, as well as in dealing with it.

I recently sat down with Ed Kane, Martin Mayer, and Walker Todd--three people who have great depth and experience in understanding the plumbing, history, and effects of the regulatory infrastructure of our financial markets. Kane is professor of finance at Boston College, past president of the American Finance Association, and cofounder of the Shadow Financial Regulatory Committee. Martin Mayer is a prolific financial journalist, a scholar at the Brookings Institution, and the author of more than 30 books on financial market issues. Todd worked in the Federal Reserve System as an attorney and economist and is now affiliated with the American Institute for Economic Research. The following conversation has been edited for clarity and length.

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