Before you answer this question, you may wish to consider the following. There are now literally hundreds of regulators of financial institutions. The federal government has many agencies involved in regulating financial institutions, including the Federal Reserve, the Treasury Department, the Securities and Exchange Commission, the Commodity Futures Trading Commission, etc. Every state has an agency that oversees the state‐charted banks, and another agency that oversees the insurance companies that operate in the state.
Every country and political entity in the world has one or more financial industry regulator. International organizations, such as the International Monetary Fund, the Financial Action Task Force, and the Bank for International Settlements in Basel, Switzerland, all have some financial regulatory authority.
Financial institutions increasingly operate on a global basis, and thus a large financial company, such as Citibank, which operates in many states and countries and sells not only banking services, but insurance and securities products, is quite literally regulated in whole or part by hundreds of different public authorities.
The world’s public financial regulatory authorities collectively have well more than 1,000 full‐time and part‐time directors (including yours truly) and literally hundreds of thousands of employees — and yet things still go terribly wrong.
In the United States, banks have been regulated at the state level for more than 200 years and at the federal level since 1863. Still, financial panics continued to occur, and banks continued to fail, causing Congress to create the Federal Reserve System in 1913.
Before creation of the Federal Reserve, the dollar was not subject to sustained inflation (there were periods of inflation and deflation) but the wholesale price index in 1913 was roughly the same as it had been in 1793. Ninety‐five years after the creation of the Fed, the dollar is worth about one‐twentieth of what it was worth in 1913, despite the fact that the Fed was supposed to provide stable money.
The greatest periods of bank failures occurred during the Depression of the 1930s after the creation of the Fed, and then again in the late 1980s and early 1990s when 1,600 banks and one‐third of all the savings and loans (S&Ls) failed.
The evidence clearly shows that abrupt, unanticipated and incompetent changes in monetary and regulatory policy by central bankers and other financial regulators have caused far more financial instability and financial institutions’ failures than have unsavory or illegal practices by managers of these institutions.