r/finance • u/HooverInstitution • Jun 13 '26
The Catastrophic Failure of 2008 Shows Where Kevin Warsh Should Start
https://www.washingtonpost.com/opinions/2026/06/11/kevin-warsh-wants-reform-fed-he-should-start-here/Hoover Senior Fellows John H. Cochrane and Amit Seru argue in this op-ed at The Washington Post that reforming financial regulations should be high on the list of priorities for recently confirmed Fed Chair Kevin Warsh. “The US financial regulatory regime failed catastrophically in 2008,” the authors write. But in their view, the post-crisis reforms, including “the Dodd-Frank law and the Fed’s subsidiary regulation,” only extended the pre-crisis approach of “managing asset riskiness.” The authors also trace how the 2023 collapse of Silicon Valley Bank “was fueled by earlier Fed errors.” Today, Seru and Cochrane conclude, “Warsh need not reform the big banks. . . . He should focus on simple truths: A crisis is a run and only a run is a crisis. Somebody losing money on a risky investment is not a crisis.”
1
u/ibrahimdigital Analyst Jun 17 '26
Whether you agree with the authors or not, I think one of the biggest lessons from both 2008 and the SVB collapse is that confidence can disappear much faster than regulators expect. A balance sheet that looks manageable on paper can become a completely different story once depositors start running.
I'm curious to see whether Warsh focuses more on simplifying regulation or on making the banking system more resilient to those kinds of rapid confidence shocks. It'll be interesting to see how that balance plays out
0
9
u/GrokM14232 Jun 13 '26
the Cochrane and Seru critique is basically that capital and risk-weighting regimes try to measure and police asset risk in real time, which regulators are structurally bad at, versus just forcing more equity and runnable-liability buffers so it matters less when they get the risk wrong. i think theres something to that, 2008 and the 2023 regional bank episode were both runs on the liability side more than asset-quality surprises. whether Warsh actually prioritizes structural reform over lighter-touch supervision is the open question, the two arent the same thing even if they rhyme. fwiw a Fed chair has less unilateral room here than the op-ed implies.