Paul Volcker Believes The U.S Financial Regulatory System Must Be Changed

Paul Volcker, the former Federal Reserve Chairman believes the U.S financial system is set up in such a way that it will continue to struggle to keep up with fast paced global markets and will most likely go through another downturn in the near future. Volcker says the system has not changed since the 1930’s and must be overhauled in order for it to become effective and robust.

The former chairman has put together a report called the Volcker Alliance which addresses the flaws in the current financial system and calls for the system to be made a lot simpler. The report states that “The system for regulating financial institutions in the United States is highly fragmented, outdated, and ineffective. A multitude of federal agencies, self-regulatory organizations, and state authorities share oversight of the financial system under a framework riddled with regulatory gaps, loopholes, and inefficiencies.”

Volcker and his supporters are aggressively campaigning for reform but realize that his proposed changes will not be readily accepted. Since World War II, as many as twenty five financial policies have been put forward to bring in reform but none of them have been approved so far.

One of the main objectives of Volcker’s policy is to remove the concentration of power and responsibility from the Federal Reserve and spread it across different agencies. The Federal Reserve will continue to be the main group that looks after the financial stability of the country but will receive support from other agencies such as the Office of the Federal Deposit Insurance Corp. (FDIC) for banks and the Comptroller of the Currency (OCC).