Regulatory Capture

The secret recording done by Carmen Segarra affirms that regulatory capture is a phenomenon that occurs when a regulator fails to adequately monitor his or her assigned organization (This is American Life). For Instance, the recording notes that a regulator should be like a like a watchdog ready to adapt to any changes within their immediate organizational environment. The Federal Reserve Bank located in New York has the mandate to all the banks situated on Wall Street. The Federal Reserve Bank is supposed to analyze and monitor the banks’ activities by ensuring that they strictly follow regulations to prevent or mitigate a financial meltdown or crisis in America. However, the article affirms that the Federal Reserve Bank has failed in its mandate to avoid a financial crisis in America. For example, most employees at the Federal Reserve Bank admitted that they were in a position to do a better job in preventing a financial crisis leading to the regulatory capture.  Secret reports were commissioned outside the public domain to avoid a recurrence of the financial crisis.

Reforms

Firstly, most wealthy clients have the perception that laws don’t apply to them, therefore, making the entire concept of Regulatory capture a mere mirage to them. Additionally, the regulatory capture has a responsibility to ensure that banks do not get involved in unnecessary risks that can affect the American economy. To avoid these obstacles, it is essential to provide that the law applies to all American citizens and ensure that banks are funded to have the capacity to take risks actively.

 

Work Cited

This American Life. “536: The Secret Recordings of Carmen Segarra.”This American Life, 16 Jan. 2018, www.thisamericanlife.org/536/transcript.

 
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