Banks and financial institutions hate regulation. It is cumbersome, costly to adhere to, and costly to circumvent. In this HuffPost blog post, Denis Kelleher outlines the five fronts on which Wall Street has been fighting government attempts to regulate banks. Big banks have largely been successful in fighting off costly regulation. In my forthcoming book published by Cambridge University Press, I advocate either total regulatory lock-down of the banking system or no regulation. In the case of the latter, governments would also have to credibly commit to not bailing out banks when they get into trouble. The mishmash of complex rules we have today isn't fit for purpose. After all, this system didn't prevent the 2008 crisis!
Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...