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Unformatted text preview: 144 P OLICY E SSAY Jonathan Burks Improving International Policy Coordination in the Wake of the Financial Crisis The ongoing financial crisis has exposed the weaknesses of the risk man- agement practices pervasive in the financial industry and the limitations of a domestic regulatory structure that fails to provide any federal regula- tor with the responsibility and authority to comprehensively oversee the financial system. Of course these problems have not been limited to the United States, as banks based abroad, like UBS, and economies around the world have also been shaken by the crisis. The crisis has also exposed the shortcomings of the international regime for economic and financial policy coordination. In its first months in office, the Obama Administration has begun to sort through the long-term policy responses needed to resolve the current crisis and prepare for the next one. An area that deserves special attention is the mechanism available for making and coordinating economic policy internationally. The challenge for the Administration is both internal where a multitude of cabinet departments and independent regulatory agencies play roles and international where there exists a hodgepodge of groups that bring together sundry parties in multiple overlapping and competing efforts to forge an international policy consensus. The June 2009 report from the Treasury Department, A New Foundation: Rebuild- ing Financial Supervision and Regulation, contains several promising initiatives. However, in key respects it stops short of the recommendations merited both by experience and prudence. Within the U.S., the financial sector is overseen by dozens of regulators with overlapping and sometimes conflicting mandates. The U.S. has five Jonathan Burks is a Masters in International Relations Candidate at the School of Advanced International Studies (SAIS), Johns Hopkins University. The opinions expressed in this policy essay are purely his own, and do not reflect the views of John Hopkins University or any other institution. 145 national-level bank regulatory agencies (the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation), two financial markets regulators (the Securities and Ex- change Commission and the Commodities Futures Trading Commission), a government-debt market regulator (the Department of the Treasury), 50 state banking regulators, 50 state insurance regulators, and a dozen or more quasi-governmental self-regulatory organizations. Under this system, a complex financial institution can be subject to five or six separate regula- tors each of which has its own statutory mission and regulatory construct....
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- Fall '11