This guest post was contributed by Charles S. Gardner, a former senior official at the International Monetary Fund. He argues we must not overlook the importance of extending effective regulation to the nonbank sector.
As Congressional action on financial industry reform shifts to the Senate from the bill passed recently by the House, the urgent need now is to fill the gaps in the piecemeal House approach. Regulators require an airtight scheme giving them clear responsibility plus tools to nip industry abuses early and drain the tendency to crisis out of world finance. This rare opportunity also must be seized to restore the Federal Reserve’s control of the money supply, eroded by decades of expanding credit creation by nonbanks. Continue reading