Why Regulators Trust Financial Markets
The 2007 financial crisis was initiated by a shock that “was by global financial standards rather modest,” particularly through American and British policy decisions, and was succeeded by a period of robustness. The effects of the crisis were most strongly felt by the US and the UK as their respective banking systems experienced its initial effects. Also, they accounted for 59 percent of the “admitted” write-offs that were estimated at US$1.1 trillion. In this chapter, the regulatory performance defects are shown not to have resulted from defective legislation or erroneous policies. Attention is drawn to the Anglo-American regulatory culture that advocated non-interventionism and how it relies on the wisdom of financial markets. The establishment of the “free market” consensus enabled pre-2007 regulators to persist even after the recession.
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