On Prudential Regulation: To Regulate Foreign Or Domestic Intermediation?(Rethinking FINANCE‪)‬

In traditional Chinese medicine, the doctor is paid as long as the patient is healthy. The patient comes in four times a year for a checkup, with adjusted lifestyle recommendations. Payment is stopped once the patient is ill. In the US, as long as the economy is healthy, "the financial doctor" in the form of the prudential regulator is considered redundant. Moreover, the prudential regulator is frequently viewed as a spoiler who inhibits growth and development. This is the paradox of prudential regulations in a capitalist economy--the better the regulator's performance, the lower the demand for its services. The success of the regulator or a prolonged period of economic tranquility leads to complacency, reducing the demand for his services, inducing under-regulation, which leads to a financial calamity. While the identity of economic actors that benefited directly from crisis avoidance is unknown, the cost and the cumbrance of regulations are transparent. Hence, crises that have been avoided are imperceptible and are underrepresented in the political discourse, and the demand for regulation declines during prolonged good times, thereby increasing the ultimate cost of eventual crises. [ILLUSTRATION OMITTED]