CHAPTER3

The Economic Consequences of Financial Regulation

Main Street Caught in the Crossfire

The dividing line between Main Street and Wall Street is nonsense in an economy that has become so heavily finance driven as that of the United States. It feels good to punish the banks, but it always involves punishing ourselves. Accountability for individual bankers is a horse of a different color, and it remains sorely lacking, to be sure. Cutting finance down to size begs the question of what will replace it as a driver of employment and economic growth.

Since the crisis broke, public policy has alternated between attempts to reinflate the credit bubble, especially the housing finance machine, and efforts to rein in finance and effectively turn ...

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