Newswise — New and sweeping federal financial regulation passed by Congress late last week will give regulators tools to clean up the next financial crisis but will not prevent another crisis, says banking expert Tim Yeager, associate professor of finance at the University of Arkansas and former economist at the Federal Reserve Bank of St. Louis.
“The Restoring Financial Stability Act of 2010 includes many features that will strengthen a federal regulatory system that for many years really hasn’t subjected Wall Street to intense oversight,” Yeager said. “But the new law will not prevent another financial crisis. The very nature of the capitalist system makes it nearly impossible for legislators and regulators to accomplish this.”
The new bill, a response to the banking and subsequent credit crisis of 2008, which pushed the U.S. economy into recession, creates stronger federal oversight of financial companies. The bill also calls for a consumer protection regulator and a panel to detect risks to the financial system.
Throughout the banking crisis and recession, Yeager has been interviewed extensively and used as a source by many publications, including Wall Street Journal, Los Angeles Times, Forbes and USAToday.
His research has focused on government-sponsored enterprises such as Fannie Mae and Freddie Mac. He has investigated the trend toward universal banking and conducted the first empirical study of the effect of the Gramm-Leach-Bliley Act, which removed barriers separating commercial banking from investment banking, merchant banking and insurance underwriting. He also authored a more recent study that found that overreaching households led to the housing foreclosure crises.
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