In the lead-up to the crisis of 2008, regulatory agencies each had their own sphere of supervision – such as banking, securities dealing, or (at the state level) insurance. A big-picture view was lacking. Some people thought about how all the pieces connected, but no one had the both the responsibility and tools to thoroughly monitor potential risks across the whole system.
"Our regulatory structure was not set up really to do that," says Richard Berner, director of the federal Office of Financial Research, and a nonvoting member of the oversight council. "Each regulator was charged with regulating different parts of the financial system, and for different purposes."
It's not that no one saw problems. The bursting of a housing bubble and the ensuing losses for investors in "subprime" mortgages made the risks of real estate investments fairly plain for all to see. And by the middle of 2008, Lehman Brothers was widely regarded as an investment bank with lots of trouble embedded in its portfolio.
But to regulators and economists, it wasn't easy to see all the interconnections among financial firms, or how the problems in US real estate would ripple outward to threaten the larger economy in America and worldwide.
Ben Bernanke, who as Federal Reserve chairman sits on the Financial Stability Oversight Council (FSOC) has put it this way: "... Prospective subprime losses were clearly not large enough on their own to account for the magnitude of the crisis.”
Read more: Five years after Lehman bankruptcy: Will we see the next crisis coming? - CSMonitor.com
"Our regulatory structure was not set up really to do that," says Richard Berner, director of the federal Office of Financial Research, and a nonvoting member of the oversight council. "Each regulator was charged with regulating different parts of the financial system, and for different purposes."
It's not that no one saw problems. The bursting of a housing bubble and the ensuing losses for investors in "subprime" mortgages made the risks of real estate investments fairly plain for all to see. And by the middle of 2008, Lehman Brothers was widely regarded as an investment bank with lots of trouble embedded in its portfolio.
But to regulators and economists, it wasn't easy to see all the interconnections among financial firms, or how the problems in US real estate would ripple outward to threaten the larger economy in America and worldwide.
Ben Bernanke, who as Federal Reserve chairman sits on the Financial Stability Oversight Council (FSOC) has put it this way: "... Prospective subprime losses were clearly not large enough on their own to account for the magnitude of the crisis.”
Read more: Five years after Lehman bankruptcy: Will we see the next crisis coming? - CSMonitor.com
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