Thoughts on financial innovation

Senate negotiators are working on new Wall Street rules to prevent the next crisis. President Obama wants strict limits on too-big-to-fail financial institutions, but it looks like Senators are moving away from tough restrictions in an attempt to reach a bipartisan compromise. The critics of financial regulation reform warn that if you come down too hard on Wall Street you’re limiting “financial innovation.” Here are some thoughts on financial innovation for the Marketplace Morning Report.

And this is a very thoughtful paper evaluating financial innovation by Robert Litan, an economist at Brookings Institution and the Kaufman Foundation. He takes a serious look at the topic and ends up with a positive vote of confidence.  It’s worth reading.