Regulatory Reform

Writing in City Journal, Luigi Zingales has a proposal regarding regulation:

Hence the need to rethink regulatory architecture along clear lines of responsibility and goals. I propose that we allocate financial regulation and supervision to three different agencies, each responsible for only one of the three principal goals of financial-system regulation. One agency would be in charge of price stability, more or less conducting the traditional monetary policy that the Fed currently conducts. A second agency would be tasked with systemic considerations, absorbing some of the extraordinary roles that the Fed has taken on during the current crisis, together with other solvency issues (often overseen by state insurance regulators). Finally, a third agency would focus on protecting the little guys, whether they’re investing in stock, depositing funds at a bank, borrowing from a bank, or buying an annuity or other insurance product.