Gross: Regulatory Suggestions

Dan Gross has an article in Slate today about regulations being suggested to address some of the problems that led to the current financial crisis. He notes that:

More regulation is certainly in the offing. But Congress tends to regulate with hindsight. After a slew of accounting scandals, Congress in 2002 passed the Sarbanes-Oxley Act, which correctly forced CEOs to sign off on the accuracy of financial statements. Markets already have started doing much of the heavy lifting of retroactive regulations. Rules that prohibit houses being bought with no money down and no-documentation mortgages? All the lenders who provided such loans are out of business.

Despite self-regulation, the article highlights some key suggestions:

1. FDIC tying the level of deposit insurance premiums to a bank's size.
2. Small tax on trades of stocks.
3. GSEs requiring higher down payments as the ratio of prices/rents rose and requiring lower down payment as they shrink.

Note that these policies would be intended to slow down irrationality, which typically is not perceived as irrationality by those who benefit from the bubbles.