Regulation and supervision
Subtitle: an ethical perspective
By: Edward J. Kane.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13895; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13895.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis.  For political reasons, most countries establish a regulatory culture that embraces three economically contradictory elements: politically directed subsidies to selected bank borrowers; subsidized provision of explicit or implicit repayment guarantees for the creditors of banks that participate in the credit-allocation scheme; and defective government monitoring and control of the subsidies to leveraged risk-taking that the other two elements produce.  In 2007-2008, technological change and regulatory competition simultaneously encouraged incentive-conflicted supervisors to outsource much of their due discipline to credit-rating firms and encouraged banks to securitize their loans in ways that pushed credit risks on poorly underwritten loans into corners of the universe where supervisors and credit-ratings firms would not see them"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/25/2008.

Includes bibliographical references.

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Mode of access: World Wide Web.