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When Regulators Do More Harm Than Good

Sometimes, protective regulations can be more of a burden that a help.

Often, the laws that legislators create to protect market systems and consumers from shady corporate practices end up hampering companies' efforts to expand, create jobs and contribute to their local economies. Other times, the lack of oversight fails to protect financial institutions from

Often, the laws that legislators create to protect market systems and consumers from shady corporate practices end up hampering companies' efforts to expand, create jobs and contribute to their local economies. Other times, the lack of oversight fails to protect financial institutions from themselves.

As The New York Times reported on Monday, Britain's Financial Services Authority admitted in a report that it did not regulate the Royal Bank of Scotland closely enough, which contributed to the bank's failure. With that in mind, FSA is proposing to increase protections, such as making bank executives liable for their poor choices.

"The FSA operated a flawed supervisory approach, which failed adequately to challenge the judgment and risk assessments of the management of RBS," the agency said in a report quoted by the news source.

Although some countries are pumping up their regulations, some organizations in the U.S. are pushing back against greater oversight. The West Virginia State Journal reports that the U.S. House of Representatives passed the Regulations from the Executive in Need of Scrutiny Act to assess the impact of regulatory measures. If passed, any federal regulation that would have more than a $100 million economic impact would first have to be approved by Congress.
 

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