The Conference Report summary of the legislation’s key provisions, provided in plain English by the Senate Banking Committee, states that it seeks to end “the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.”8 While there is much to criticize about Dodd–Frank, I cotton to those blunt statements on ending too big to fail. For, if after the myriad rules and regulations are written and implemented we have not eradicated too big to fail from our financial infrastructure, reform will have failed yet again. I have spoken to this topic on several occasions.9 If you pull up a copy of the Sept. 28, 2009, Wall Street Journal, you will find an article I wrote with my colleague Harvey Rosenblum about the interference too big to fail poses for the effective conduct of monetary policy. In looking at regulatory reform and implementing Dodd–Frank, I think a key point worth repeating is that the distinction between “commercial banks” and “the shadow banking system” is a false one. The two became intertwined beginning with the bypassing of Glass– Steagall strictures by Sandy Weill and Citicorp and the deregulatory initiative of Gramm– Leach–Bliley.

The late New York intellectual Irving Kristol is reported to have said: “Don’t fall for fantastical notions that have nothing to do with the way people really are.”4 My experience of having worked in real time in the financial markets leads me to a different perspective on financial operators and markets than that of most of my colleagues  1  See www.number10.gov.uk/history-and-tour/prime-ministers-in-history/margaret-thatcher. 2  See “Were 364 Economists All Wrong?” Institute of Economic Affairs, www.iea.org.uk/sites/default/files/publications/files/upldbook310pdf.pdf. 3  See “Were 364 Economists All Wrong?” BBC Newsnight report by Stephanie Flanders, http://news.bbc.co.uk/2/hi/programmes/newsnight/4803858.stm. 4  See “Three Cheers for Irving,” by David Brooks, New York Times, Sept. 22, 2009. BIS central bankers’ speeches  1  at the Federal Open Market Committee (FOMC). This not only affects my views on the implementation of monetary policy, but also shapes my perspective on regulation. Monetary policy and regulation are intricately linked. When conducting its monetary policy, the Fed is governed by a dual mandate: creating the monetary conditions to foster maximum employment growth while constraining inflation and its alter ego, deflation. These goals cannot be realized without financial stability that results from effective regulation. As the FOMC now sets its sights on concluding the accommodative monetary policy it fashioned to stave off financial collapse and deflation, our supervision and regulation team is wrestling with developing the appropriate policy for dealing with the lingering effects of the financial crisis, and, most importantly, erecting a new regulatory framework to substantially reduce the chances of financial crises.