Thursday, July 1, 2010

Taylor on the Financial Overhaul Bill

Good op-ed piece in the WSJ today. Stanford economist John Taylor, known for the Taylor Rule that tracked well the Fed's interest rate setting until the mid-2000s, argues the financial overhaul bill will be ineffective in preventing another crisis because it doesn't address the causes of the crisis.

There may be good reasons for some of the changes in the bill. One needs to examine the details more closely, as well as the actual regulations developed after the bill is passed, to have an idea whether this is so. Even then, we may need experience with the regulations to have a better idea about the efficacy of the regulations. But we have better ideas today about the causes of the crisis and clearly the bill does not address them.


  1. Based on recent data, do you think we'll see a third stimulus package (counting the "jobs bill" as the second)?

  2. I think there will be real pressure for another "jobs bill" especially with the likely numbers from today's announcement concerning unemployment. I see Krugman's op-ed piece today is about now is not the time for austerity.