UVA Law School Dean's New Book "Wasting a Crisis" Questions Rush to Regulate After Financial Meltdown

Peter Kye, Greg Rustico, Boris Bourget, Mario Peia, Sejal Jhaveri, Andrew Chen, Lyndsay Medline and Courtney Miller

Dean Paul Mahoney's first book draws on his scholarship covering the history of securities regulation.

March 18, 2015

After the financial crisis in 2008, politicians and regulators pointed to the need for more regulation to steady the world's markets and get big banks back in line.

Not so fast, says University of Virginia School of Law Dean Paul G. Mahoney in his new book, "Wasting a Crisis: Why Securities Regulation Fails," published by the University of Chicago Press.

"The aftermath of a financial crisis is a bad time to overhaul financial regulation," said Mahoney, an expert in securities regulation and corporate finance. "Right after a crisis, politicians and regulators are trying hard to avoid blame for what happened. And so when they're looking for causes of what happened, they're going to ignore any decisions or policies that could be associated with them."

Instead, politicians and regulators argue the crisis was caused by bad actors — such as banks — doing bad things.

As the story goes, "they were allowed to do those things because there wasn't sufficient regulation, and if we add in more regulation, that's going to solve the problem," said Mahoney, who coined the phrase "market-failure narrative" to describe the frequently peddled explanation.

It's a tale that's been repeated by politicians and regulators since the late 17th century, as Mahoney discovered while researching his book, which offers a legal and economic history of securities regulation.

Founded in 1819, the University of Virginia School of Law is the second-oldest continuously operating law school in the nation. Consistently ranked among the top law schools, Virginia is a world-renowned training ground for distinguished lawyers and public servants, instilling in them a commitment to leadership, integrity and community service.

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