The New Laws and Regulations for Financial Conglomerates : Will They Better Manage the Risks than the Previous Ones?

Federal and state laws allow U.S. financial conglomerates to own securities, insurance and depository institutions through a holding company structure. Before the recent crisis, the federal or state agency responsible for regulating a financial conglomerate as a whole was determined by what subsidiaries that the holding company owned. For example, the Office of Thrift Supervision supervised AIG, instead of the Federal Reserve because it owned a thrift, not a bank. This article discusses how the different financial conglomerate regulations contributed to the recent financial crisis and whether the reforms in the financial regulatory reform legislation in Congress corrects these problems