ABSTRACT
The global financial crisis that began in 2007 is stimulating substantial debate about the governance of global financial markets. Some policymakers have called for the creation of a global financial regulator with the power to monitor domestic financial markets and punish those countries that fail to implement adequate prudential regulations.2 Other observers expect new international regulations to emerge organically in reaction to the global scale of the crisis. International co-operation, however, is not an automatic response to international financial instability. Financial regulators are political agents subject to domestic political constraints and bureaucratic incentives. This is no more apparent than in the US, where in the past regulators have pressed for international financial regulation only when it suited their particular domestic circumstances. Today’s financial crisis offers no guarantee of US leadership in creating or modifying global standards. Indeed, US regulators currently face substantial challenges in focusing their attention internationally, and the resulting void in leadership could allow a patchwork of disparate national and regional regulatory regimes to emerge in response to the crisis.
