ABSTRACT
The Brazilian institutional structure of financial regulation is based on specialist agencies. A very good manifestation of principal-agent theory is the governance of the Job Time Guarantee Fund, a compulsory fund created in the 1960s by the Castello Branco government. Instead of specialized agencies they have a single, mega-regulator. article of the 1988 Brazilian Constitution states that a Complementary Law can be enacted by Congress to regulate the financial sector. The Brazilian banking system is dominated by a small number of large institutions, which are either state-owned or privately owned. Another response is to use political economy arguments and to recognize that Brazilian society is divided over several issues regarding financial regulation that give rise to much controversy. Nevertheless, a reasonable comparison of the qualities a Fed Governor should possess and Dr. Diamond's background clearly demonstrates that he is not the right person, author believe, for the particular job.
