"Toward a 'Responsible' Future: Reframing and Reforming the Governance of Financial Markets," in Iain McNeil and Justin P. O'Brien (eds.), THE FUTURE OF FINANCIAL REGULATION (Oxford: Hart Publishing, 2010), Chapter 24, pp. 395-421 (page proof pagination 401-427).
The current efforts to design relevant reforms of the troubled financial markets both in the US and abroad are preoccupied with repairing a fundamentally flawed set of policies . There will no doubt be some initial sense of accomplishment as regulatory jurisdictions are reorganised and regulatory agencies are created and or shuffled about in a reform scheme that seems radical on the surface, but is in fact superficial. After a brief consideration of the dynamics of the "blame game" that is generating and shaping most of the reform agenda in Washington, London and elsewhere, I make the case for an approach that goes beyond mere tinkering with traditional regulatory mechanisms and instead focuses on the need to reform the "governance" of the financial sector. This perspective requires that we shift and raise our sights from the arena of institutions and regulatory mechanisms to the domain of governance regimes. Further, I make the case the existence to two interrelated regimes that require attention if we are to make any headway in the design of relevant and effective reforms. One of those regimes -- the regulatory, which focuses on governance through control -- has already received considerable attention from analysts, and I highlight one effort (by Hood, Rothstein and Baldwin, hereafter designated as HRB) at framing the elements of that regime. The other regime -- accountability, which fosters governance through responsibility -- requires more analytic attention, and I offer the foundations for a framework that seeks to emulate the HRB effort. I conclude by offering some basic "design principles" that need to be kept in mind as we deal with the future of financial market governance.