If we don’t understand the cross-cutting effects and inherent contradictions in all of the stringent standards now being written into final form, we risk doing real damage to the sound, stable and — yes — profitable financial industry regulators say they support and the economies sorely need.Why does this matter? For one, it will raise costs. Also, it is likely to make banks more cautious, not because the underlying deal is financially unsound but because of the fear of regulatory interference. In the current slow-growth environment, does this really make sense?
Petrou argues that Dodd-Frank be simplified and changed so that the regulators themselves can be held liable. We'll see how fast that happens.