Constructive criticism of Obama's financial regulatory proposals

Fortune magazine asks several economists their opinions about President Obama's financial industry regulatory proposals. Overall, they're not impressed.

Prof. Richard Carnell, Fordham University Law School:

It places naive faith in regulation. Yet regulation failed disastrously over the past decade. Bank regulators had ample powers to keep banks safe but did too little, too late.

Byron Wien, Vice Chairman, Blackstone Advisory Services:

There are two areas where I think regulation is needed. The first is bank leverage. The rules are on the books and it's up to the Fed to implement them. ... The second is derivatives and there we really need to write some new regulation providing greater transparency, margins, risk sensitivity, and awareness.

Prof. Darrell Duffie, Stanford University:

I think [the regulatory plan] is a major step in the right direction, but there's room for improvement. ... The regulatory plan could improve, most importantly, by providing additional clarity on how large systemic financial institutions can be safely resolved. There can also be further improvements in the price transparency of over-the-counter derivatives.

Michael Lind, New America Foundation:

I think this is doomed. ... In the U.S., discretionary regulation tends to be corrupted. I want structural separation between retail banking and casino banking, where retail money couldn't be used to finance the proprietary trading.

Jaret Seiberg, Concept Capital:

The fundamental problem during this crisis was that when times were good no one had the political will to pull the plug.

Robert Pozen, MFS Investment Management:

The Federal Reserve should monitor the system and then work with the functional regulator to fix problems. At the same time, we should fill the gaps in the functional regulation.