The fundamental, still-ignored failure of the crisis was prudential regulation's inability to measure risk: Basel I and Basel II were in place and failed, yet reform proposals never mention this; worse, investment banks were regulated under Basel II via SEC supervision, so claims that they were 'unregulated' are false—they had capital-adequacy standards based on broken risk-measurement formulas that gave a false sense of security.

causalpending

Speaker

Charles Calomiris

Evidence Quote

the Basel 2 system actually outsources more to the credit rating agencies then Basel 1 did so there is a deep problem in our political economy of banking regulation

Source

Charles Calomiris on the Financial Crisis 10/26/2009EconTalk
Created: 6/15/2026, 9:20:15 AM

My Notes

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