It is impossible for regulators or anyone else to control mammoth financial conglomerates that are designed to maximize risk-taking without personal consequences to the actors involved. The answer is not more regulation, but smaller institutions that separate deposit taking utilities from investment banking/speculating. See: UBS Restructuring shows need for banking’s simpler future.
Breaking up the conglomerates and demanding they build up self-insuring capital buffers within their risk-seeking arms is critical and will increase their cost of capital, reduce free cash flow and lower earnings for shareholders and executives. And that is as it should be.
Andrew Huszar, senior fellow at Rutgers Business School, discusses revelations of the Federal Reserve Bank of New York’s handling of Goldman Sachs in secret recordings and how the role of regulation has changed in the banking industry since the financial crisis. Here is a direct video link.