Financial Regulation After the Fall

Source: Robert Kuttner, Dēmos, January 8, 2009

America’s financial system has undergone a severe shock that is still cascading throughout the real economy. As financial institutions, their investors and homeowners have lost several trillion dollars, the combination of a contraction in asset values, declining consumer and business demand, and a weakened credit system have pushed the economy into a classic downward spiral. In the absence of heroic government measures, the financial crisis will lead to a serious general depression. Yet very substantial public spending and recapitalization of the nation’s financial system, though necessary, are not sufficient. These measures must be combined with comprehensive regulation.

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