Posted 8:40 a.m. Tuesday, Jan. 26, 2016
Since 2002, Elizabeth Brown, associate professor of Legal Studies, has been researching ways to reform how the U.S. regulates financial services
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Elizabeth Brown, associate professor of Legal Studies.[/caption]
Since 2002, Elizabeth Brown, associate professor of Legal Studies, has been researching ways to reform how the U.S. regulates financial services. We asked her some questions about it.
Q: Can you explain this research and why it is necessary?
A: I believe that the U.S. regulatory structure should move away from the hybrid functional-institutional structure that it currently employs towards one in which regulatory agencies are consolidated and focus on regulating specific risks (market conduct, prudential, systemic, etc.). While the U.S. has over 115 federal and state agencies that regulate some aspects of financial services, these agencies are organized around whether the institutions or products are classified as belonging to the categories of banking, securities, or insurance. Financial conglomerates and innovative financial products have rendered these old categories virtually meaningless as the most recent financial crisis illustrated.
The U.S. regulatory structure contains both unnecessary duplicative regulation and regulatory gaps. The duplicative regulation adds costs without enhancing safety and the regulatory gaps allow financial firms to engage in excessive risk taking that can undermine financial stability. In addition, no one agency is responsible for overseeing the entire system or regulating financial conglomerates on a consolidated basis. In my published articles, I correctly identified these problems prior to the financial crisis. For example, please see my article "E Pluribus Unum — Out of Many, One: Why the United States Needs a Single Financial Services Agency," University of Miami Business Law Review, Fall/Winter 2005, which is available at SSRN: http://ssrn.com/abstract=757010.
Q: In response to the Great Recession, the Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law. Doesn’t that address the need for increased financial regulation?
A: The Dodd-Frank Act did little to change this system. This is particularly true in the area of insurance. Insurance continues to be regulated almost exclusively at the state level, even though the insurance conglomerate American International Group (AIG) received a $182 billion bailout from the federal government during the financial crisis. The creation of Federal Insurance Office (FIO) was intended as a first step towards addressing the regulatory problems in the area of insurance. FIO does this by attempting to enhance the federal government's understanding of the insurance industry and to help the Financial Stability Oversight Council identify any insurance financial conglomerates that pose systemic risks that require federal oversight. As a result, I want FIO to succeed, and serving on the Federal Advisory Committee on Insurance provides me with a means to help FIO fulfill its statutory duties.
Q: You’ve served on the FACI since August 2014. How does your work for the FACI inform your teaching and research?
A: In BUS 205, I discuss how the U.S. regulates financial services when we discuss the issuance of securities by corporations, debtor-creditor relations, and bankruptcy. Because BUS 205 is an introductory course that surveys the legal environment in which businesses operate, I cannot go into a great deal of depth. While at Georgia State University (GSU), I created a new course, Law, Regulation and Risk Management. That course focused on how the government regulations attempt to manage risks that cannot be adequately addressed through private legal structures (i.e., contracts, market forces). It examined government regulations in several areas, one of which was financial services. Since this course was an upper level writing emphasis course at GSU, I was able to go into more depth about how and why the U.S. regulates financial services as it does than I am able to do in BUS 205. I am planning to propose that UWL offer a course like Law, Regulation and Risk Management at some point in the future. Such a course would be advantageous to many business students, particularly those majoring in finance and management.
Elizabeth Brown, associate professor of Legal Studies.[/caption]
Since 2002, Elizabeth Brown, associate professor of Legal Studies, has been researching ways to reform how the U.S. regulates financial services. We asked her some questions about it.
Q: Can you explain this research and why it is necessary?
A: I believe that the U.S. regulatory structure should move away from the hybrid functional-institutional structure that it currently employs towards one in which regulatory agencies are consolidated and focus on regulating specific risks (market conduct, prudential, systemic, etc.). While the U.S. has over 115 federal and state agencies that regulate some aspects of financial services, these agencies are organized around whether the institutions or products are classified as belonging to the categories of banking, securities, or insurance. Financial conglomerates and innovative financial products have rendered these old categories virtually meaningless as the most recent financial crisis illustrated.
The U.S. regulatory structure contains both unnecessary duplicative regulation and regulatory gaps. The duplicative regulation adds costs without enhancing safety and the regulatory gaps allow financial firms to engage in excessive risk taking that can undermine financial stability. In addition, no one agency is responsible for overseeing the entire system or regulating financial conglomerates on a consolidated basis. In my published articles, I correctly identified these problems prior to the financial crisis. For example, please see my article "E Pluribus Unum — Out of Many, One: Why the United States Needs a Single Financial Services Agency," University of Miami Business Law Review, Fall/Winter 2005, which is available at SSRN: http://ssrn.com/abstract=757010.
Q: In response to the Great Recession, the Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law. Doesn’t that address the need for increased financial regulation?
A: The Dodd-Frank Act did little to change this system. This is particularly true in the area of insurance. Insurance continues to be regulated almost exclusively at the state level, even though the insurance conglomerate American International Group (AIG) received a $182 billion bailout from the federal government during the financial crisis. The creation of Federal Insurance Office (FIO) was intended as a first step towards addressing the regulatory problems in the area of insurance. FIO does this by attempting to enhance the federal government's understanding of the insurance industry and to help the Financial Stability Oversight Council identify any insurance financial conglomerates that pose systemic risks that require federal oversight. As a result, I want FIO to succeed, and serving on the Federal Advisory Committee on Insurance provides me with a means to help FIO fulfill its statutory duties.
Q: You’ve served on the FACI since August 2014. How does your work for the FACI inform your teaching and research?
A: In BUS 205, I discuss how the U.S. regulates financial services when we discuss the issuance of securities by corporations, debtor-creditor relations, and bankruptcy. Because BUS 205 is an introductory course that surveys the legal environment in which businesses operate, I cannot go into a great deal of depth. While at Georgia State University (GSU), I created a new course, Law, Regulation and Risk Management. That course focused on how the government regulations attempt to manage risks that cannot be adequately addressed through private legal structures (i.e., contracts, market forces). It examined government regulations in several areas, one of which was financial services. Since this course was an upper level writing emphasis course at GSU, I was able to go into more depth about how and why the U.S. regulates financial services as it does than I am able to do in BUS 205. I am planning to propose that UWL offer a course like Law, Regulation and Risk Management at some point in the future. Such a course would be advantageous to many business students, particularly those majoring in finance and management.