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Michael S. Barr

The financial crisis nearly decimated global financial markets and in fact devastated the real economies of the United States and Europe, with concomitant global harm. The crisis exposed fundamental weaknesses—both procedural and substantive—in the international financial regulatory architecture. The International Monetary Fund, World Bank, and World Trade Organization were never equipped to deal with the growing complexity, breadth, and size of global finance, and instead left rulemaking and supervision largely to the domestic arena. The cross-border rules that were developed by national regulators and the international standard-setting bodies proved woefully ineffective. Despite strategies to increase the accountability and legitimacy of these hybrid standard-setting bodies, the rules failed substantively, and overwhelmingly. The ‘soft-law’ architecture left unchecked a decades-long race to the bottom, and proved weak in the face of global financial institutions. The crisis raises two fundamental questions: first, how can we best build a substantively more effective international financial architecture with more than one architect? And second, how can we foster a global regulatory architecture that is legitimate and accountable—one that reflects our most basic values?