Regulation Is Not Ethics

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At a holiday party last month, an acquaintance asked a pointed question about banks. A well-informed person, she was aware of banks' arguments that overregulation was keeping them from making loans, but she was somewhat skeptical of that argument. When told that indeed such was the case, she responded: "Well, how can banks be made to act ethically without regulations?"

It was a brief conversation, but we made two points in response:

1. Banks are not opposed to regulation. What they object to is excessive regulation and regulations that are misdirected or overly broad.

2. The vast majority of bankers--based on the many we have known over the years--are …