Vol. 1999-8

The"New Economy,"AgencyStructure, and Financial Modernization

A friend and long-time reader of these reports called recently to say that the last report, dealing with some possible implications for banking of the current economic boom (Vol. 1999-7), may have underestimated the importance of that boom. It may be producing what some now refer to as the "New Economy." Moreover, he felt that the financial regulatory structure is a serious impediment to the successful adjustment of the financial industry to the New Economy. He promised that a letter would follow; I countered with the suggestion that he might wish to take pen in hand - as we Luddites would put it - and serve as guest author for the present report.

My instinct was fully justified. The report I received was most impressive and appears below. I do not agree with some of the points, but I think that my friend produced an exceedingly interesting, even light-hearted, text that, at the same time, takes an unusually perceptive look at the regulation of banks and other financial institutions. The author prefers anonymity, writing with the nom de plume of Frip Chissom, a name that a few readers may recall encountering in several early reports. He has also refused to accept an honorarium, which played no part in my decision to publish but which I am delighted to acknowledge.

Carter H. Golembe
October 30, 1999