Henry Paulson’s new plan to overhaul regulation of the US financial system has led to firestorms of debate. Let’s not get into the specifics here, since the way Wall Street is policed is of little direct relevance to India.
But don’t be surprised if the US treasury’s game plan to radically refit regulatory plumbing leads to similar plans in other parts of the world—including herein India.
It was not too long ago that financial regulators in various corners of the world were agog with intense talk about how to create a “new financial architecture”. Part of the reason was that the world was looking for ways to reduce market instability. The waves of crises in the 1990s—Mexico, Europe, Asia, Russia—had lashed regulators from their stupor.
But the world economy was spared gut-wrenching crises after 2001—till the credit crisis came along. The Paulson salvo could reopen that old debate on the new financial architecture.