The Financial Crisis and the Challenge of Government Regulation

Abstract

This article examines the recent financial crisis and the challenges it poses for government regulations. The causes of the financial crisis are examined in terms of moral hazard, corporate governance, systemic risk, and government policy, followed by an explanation of major public policies and programs developed to resolve short- and long-term problems resulting from the crisis. Governmental financial reforms bring new challenges and concerns about the role of government in the market system, utilize different approaches to regulation, and highlight a number of transparency concerns. The article concludes with a discussion of the future development of regulation.