Bear Stearns, and the Flawed Case for Further Securities Regulation

Provocative piece by the AEI’s Peter Wallison on the case against further securities regulation. The gist comes right away:

Regulating securities firms the way we regulate banks, and giving them routine access to the Fed’s discount window, makes no practical or policy sense. Unlike banks, securities firms have no regular or inherent need for liquidity, and their failure—no matter how large they are—will not ordinarily cause a systemic event. Bear Stearns was bailed out because of the unprecedented fragility—indeed panic—in the world credit markets in mid-March. The fact that this has not happened in seventy years should tell us something. Accordingly, those who understand the failures and costs of regulation (to paraphrase the late William F. Buckley) should stand athwart the path to needless controls yelling “Stop!”