"Financial crises always start the same way. Loose monetary policy leads to an increase in debt and a rise in risk-taking. Over-confident financiers, lax regulators and politicians desperate to please voters operate in this toxic environment until a bubble eventually bursts, taking the financial system down with it. I am not saying we are heading for this fate in the very near future. But it is worth noting that this coming week the US Congress may very well pass a bill to rollback the post-financial crisis-era Dodd-Frank reforms. This is happening at a time when interest rates have been at historic lows for nearly 10 years, public and private debt is at record levels, consumer debt loads and subprime defaults are rising, and politicians are looking to throw a bit more kerosene on the economy to seduce voters in the run-up to November’s midterm elections. "
"Rolling back these particular rules is not going to trigger a crisis. The US banking industry is better capitalised than it was in 2008. The next big market debacle is more likely to emanate from the corporate world than from banks. Even so, this “reform” bill takes us in exactly the wrong direction, at precisely the wrong time. "
"Now would be a good time to raise capital standards on safe haven banks that sit at the centre of the capital markets, rather than lower them. It is always a good idea to have a cushion before the next crisis comes. This bill will do just the opposite."
"Is this where we want to be at the end of a recovery cycle, with debt loads at record levels and the interest rate environment changing? No. Sadly, short memories and rollbacks of post-crisis reform are another common refrain in financial history."