Funds to Meet Social Priorities

I support the primary and secondary thrusts of the recommendations of the President’s Commission on Financial Structure and Regulation. The primary thrust of these recommendations is that each financial institution should decide for itself where its comparative advantage lies within the domain of financial intermediaries and that institutions that are doing the same things should be subject to the same regulations. The secondary thrust is that the amount of regulations should be substantially reduced. While it is easy to quibble about details and timing I think the Commission should be given the benefit of the doubt on these matters. They result from a balancing of objectives that no outsider can make and that no insider with vested interests should be allowed to make. I do this despite my interest in channeling funds toward social priorities. First, the present institutions and regulations have not channeled funds toward social priorities in sufficient quantities to be worth the inequities that they have produced. The present arrangements are simply not worth preserving as a vehicle for meeting social objectives. Second, the present arrangements assume that you can compartmentalize financial intermediaries so that institutions that are under different regulatory handicaps do not compete with each other. This assumption has simply proven to be untrue. Moreover, there probably is no set of regulations that could stop poaching on the other guy’s turf. As a result, all regulations should be acrossthe-board regulations on all intermediaries. I also admit that all social priorities could be met with budgetary expenditures and/or tax credits (tax expenditures). I am convinced that in a perfectly functioning world most social priorities should be