Guardians of Finance: Making Regulators Work for Us

By Gerard Caprio Jr. ’72, William Brough Professor of Economics, James Barth and Ross Levine. MIT Press, 2012. The authors argue that the financial meltdown of 2007 to 2009 was no accident. Senior regulatory officials around the world knew or should have known that their policies were destabilizing the global financial system, had years to process the evidence that risks were rising and had the authority to change their policies—and yet they chose not to act. Rather than just add more regulation, which is post-crisis “business as usual,” the authors propose a system to hold regulators accountable and to reduce the bias of regulators in favor of the industry they oversee.