July 2, 2009

Richmond Fed's Economic Quarterly Examines Consolidating Financial Regulation

Richmond, Va.

The Consolidation of Financial Regulation: Pros, Cons, and Implications for the United States by Sabrina R. Pellerin, John R. Walter, and Patricia E. Wescott

Several countries have moved toward a more consolidated financial regulatory regime, and many economists and policymakers favor doing the same in the United States. Vesting a smaller number of agencies with more regulatory power could provide benefits, such as increasing information sharing and public accountability while reducing duplication of duties. But there are costs as well, argue Sabrina R. Pellerin, John R. Walter, and Patricia E. Wescott. For instance, greater consolidation could lead to a lack of regulatory competition, fewer new ideas, and less specialization. The authors conclude that there are “strong tensions between achieving the benefits of consolidation and preventing the costs that might arise from a lack of competition when there is only one regulator.”

You can find the full text of this article and others in the latest issue of Economic Quarterly.

Also in the Spring 2009 issue:

• Estimating a Search and Matching Model of the Aggregate Labor Market by Thomas A. Lubik
• Should Increased Regulation of Bank Risk-Taking Come From Regulators or From the Market? by Robert L. Hetzel
• Monetary Policy in the 2008-2009 Recession by Robert L. Hetzel

The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For free copies or more information, contact the Federal Reserve Bank of Richmond’s Public Affairs office at (804) 697-7982.

The Federal Reserve Bank of Richmond is one of 12 District Reserve Banks that together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Richmond Fed serves the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

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