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Balancing the BanksGlobal Lessons from the Financial Crisis$
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Mathias Dewatripont, Jean-Charles Rochet, and Jean Tirole

Print publication date: 2010

Print ISBN-13: 9780691145235

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691145235.001.0001

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Lessons from the Crisis

Lessons from the Crisis

(p.10) Chapter 2 Lessons from the Crisis
Balancing the Banks

Jean Tirole

Princeton University Press

This chapter aims to contribute to the debate on financial system reform. The first part describes what is perceived to be a massive regulatory failure, a breakdown that goes all the way from regulatory fundamentals to prudential implementation. The second part discusses some implications of recent events for financial sector regulation. It argues that to avoid a repetition of the financial crisis, we need both to change public policies that contributed to the crisis (particularly the mortgage crisis) and to institute financial reforms. Desirable reforms of public policy regarding real estate lending include promoting consumer protection and reducing subsidies. Financial regulation must also be international. The creation of supranational regulatory structures has become increasingly urgent in a world in which institutions and counterparties are truly international.

Keywords:   financial crisis, financial regulation, regulatory reform, financial industry, financial system reform, real estate lending, subsidies

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