Warsh emphasized during his speech at Stanford University’s Paul Brest Hall that his three pillars — capital standards, regulators and market discipline — could be applied to financial legislation, The Stanford Daily reports.
“These three pillars need to be complementary,” Warsh said, according to The Stanford Daily. “I am worried that market discipline and capital standards are being relegated instead of revived.”
Warsh said that the idea “that with more regulators, with more funding and more power, bad things won’t happen” is a misconception.
“The risk of Dodd-Frank is that we end up with several oligopolistic systems on top of the financial center that will make it increasingly difficult for smaller regional banks to function,” Warsh said, The Stanford Daily reports.
Though Warsh expressed support for financial reform, he also expressed concern that the Dodd-Frank Act will be no match for the task.
Warsh also advocated for a financial system in which “an early assessment of financial firms and vibrant competition among them is the best way to avoid another financial crisis.”
“The largest firms must tell regulators [that] their failures will not endanger the economy,” Warsh said, according to The Stanford Daily. “If they can’t pass this simple test, then they should be diminished.”
Before serving as governor on the Federal Reserve Board from 2006 to 2011, Warsh served as a special assistant to the president for economic policy and as executive secretary of the White House National Economic Council from 2002 to 2006. Warsh also served as a vice president and executive director for Morgan Stanley’s Mergers and Acquisitions Department.