Jack Lew, former US treasury secretary and an adviser to President Barack Obama during the financial crisis in 2008, has told the BBC the world remains at risk from financial threats.
He says loosening regulation would not be a good idea: “We should not disarm at a moment when we’re out of the last financial crisis, but still in a world with substantial financial risks.
But he says no to tighter rules.
“I don’t personally believe we should do more than we need to.”
Looking back on the unfolding financial crisis, he told the BBC’s Today Programme the bad news had kept on escalating.
“I have never seen a situation where every single day the numbers were so much worse than the day before that you literally had to keep revisiting how much fiscal stimulus the economy would need in order to stimulate a recovery,” he said.
He said action taken then, both in supporting the financial system and tightening up regulation, had borne fruit: “What our reforms of Wall Street after the crisis did was, for the first time since Great Depression, give us the tools to safeguard the evolving financial system.”
The Dodd-Frank Act was the key piece of law-making designed to ensure there would never be another 2008-style meltdown.
Its aim is to keep a closer eye on the institutions that are “too big to fail” and to limit the risks they take.
President Donald Trump thinks regulation of the financial sector is now too onerous.
One part of the Dodd-Frank act is the Volcker Rule, which is designed to prevent banks from using their own money to trade.
Last week, that was officially opened up for review, after Trump appointee Keith Noreika announced he wanted views on how to define better which activities are prohibited by this rule.
Mr Lew gave a warning on making significant changes to the rules: “There’s been a big push back saying this has gone too far.
“I fear that as the memory fades, some of the simple nostrums about clearing away regulation start to take on salience, as if the stakes weren’t high enough in 2007-08.”
But although he thinks the level of regulation is currently sufficient, he says there are no guarantees that these existing rules will prevent a new major financial shock.
“The risks in the future are unlikely to come from the places they’ve come from in the past,” he said.
“We all know crises will come in the future, what we don’t know is when and how.”
Source: BBC News