Wednesday, June 30, 2010

New Financial Regulation

I'm not sure what to make of the new financial reform package being ushered through the House.  In this past Friday's WSJ, an analyst at Moody's 'Economist' said he expects the bill to shave off about .3% per year from the United States' Gross Domestic Product (GDP).  Others say the reforms will restore confidence in the U.S. Financial sector and encourage investment.  I have no exact predictions of my own, but I fear the reforms add bureaucracy in areas where none is necessary (thus reducing efficiency and profits in the financial sector), discourage innovative investment practices, and aim the spotlight at hedge funds instead of at the strange brew of government incentives encouraging sub-prime lending.

Unfortunately, as with most government policies, we must sit and wait to see the real economic effects of the regulations.

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