Governor Kevin Warsh
At the New York Association for Business Economics, New York, New York
February 3, 2010
Regulation and Its Discontents
Thank you to the New York Association for Business Economics for hosting me.
We remain in a period of great consequence for the U.S. economy. The policy judgments currently
being considered are as significant as those made during the darkest days of the Panic.1 And here, I
am not only referring to the appropriate conduct of monetary policy.2 Fiscal, trade, and regulatory
policies may turn out to be no less determinative to the path of the U.S. economy.
On fiscal matters, what size government is desired, and how should it be funded? Will low sovereign
funding costs and accommodative financial markets make policymakers lax in developing a credible,
fiscal exit regime? And, will the costs of implicit guarantees add to sovereign debt burdens?
On matters of international trade, will policymakers push to extend the post-World War II bipartisan
consensus favoring free trade? If the United States declines to talk and act forcefully on the merits of
open, competitive markets, who will? Will our quiet be deemed acceptance by those pushing the
false promise of protectionism?
And, as I will explore in the balance of my remarks, are the financial regulatory policy prescriptions
proposed during the past year sufficient for meaningful reform? Will these policies mitigate the risks
of future financial crises? Will they support long-term economic growth? Now is not only a time of
consequence for regulation and the U.S. economy. It is also a time for choosing.
A Time for Choosing
Nearly 30 years ago, at another critical time of choosing--in a period of economic malaise--
policymakers were reminded from many quarters of the need to keep their wits about them in
A leading intellectual of the time, Irving Kristol, remarked: "Our economic problems are not
intractable…Economic policies that are just a bit more sensible, especially in the areas of taxation
and regulation, can m