| Cover | 1 |
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| Contents | 8 |
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| Preface and Acknowledgements | 11 |
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| List of Abbreviations | 12 |
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| 1 Definition and Theories of Regulation | 15 |
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| 1.1 Definition of Regulation | 15 |
| 1.2 Forms of Regulation | 18 |
| 1.3 The Public Interest Theory of Regulation | 21 |
| 1.4 The Capture Theory of Regulation | 23 |
| 1.5 The Special Interest Groups Theory of Regulation | 27 |
| 1.6 Concluding Remarks | 28 |
| 2 Arguments for and against Regulation | 30 |
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| 2.1 Introduction | 30 |
| 2.2 Avoiding Corporate Failure | 31 |
| 2.3 Creature of the State | 31 |
| 2.4 Market Failure | 32 |
| 2.5 The Protection of Rights | 34 |
| 2.6 Efficiency | 34 |
| 2.7 Impeding Innovation | 35 |
| 2.8 The Cost of Compliance | 36 |
| 2.9 Circumvention of Regulation | 37 |
| 2.10 Ineffectiveness | 38 |
| 2.11 Corruption as a Justification for Financial Regulation | 38 |
| 2.12 The Greed Game | 42 |
| 2.13 Concluding Remarks | 43 |
| 3 Regulation, Deregulation and Financial Crises | 45 |
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| 3.1 The Free-Market Doctrine | 45 |
| 3.2 Free Banking and Financial Laissez-Faire | 54 |
| 3.3 Regulation and Banking Efficiency: The Empirical Evidence | 57 |
| 3.4 Deregulation as a Cause of Financial Crises | 62 |
| 3.5 Concluding Remarks | 69 |
| 4 Good Regulation: Payday Loans, Securitisation and Insider Trading | 70 |
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| 4.1 What is Good Regulation? | 70 |
| 4.2 Payday Loans | 71 |
| 4.3 Arguments for and against the Regulation of Payday Loans | 73 |
| 4.4 Securitisation and Derivatives | 76 |
| 4.5 Insider Trading | 84 |
| 5 Good Regulation: Leverage and Liquidity | 92 |
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| 5.1 The Leverage Ratio: Why Does it Matter? | 92 |
| 5.2 Leverage as a Cause of the Global Financial Crisis | 95 |
| 5.3 The Basel 3 Leverage Ratio | 97 |
| 5.4 Arguments for and against the Leverage Ratio | 99 |
| 5.5 The Concept of Liquidity | 101 |
| 5.6 The Role of Liquidity in the Global Financial Crisis | 104 |
| 5.7 Arguments for the Regulation of Liquidity | 108 |
| 6 Bad Regulation: Basel 1 and Basel 2 | 112 |
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| 6.1 The Basel 1 Accord | 112 |
| 6.2 From Basel 1 to Basel 2 | 118 |
| 6.3 A Critical Evaluation of Basel 2 | 120 |
| 6.4 Basel 2 and the Global Financial Crisis | 131 |
| 6.5 Conclusion | 133 |
| 7 Bad Regulation: Basel 2.5 and Basel 3 | 135 |
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| 7.1 From Basel 2 to Basel 2.5 | 135 |
| 7.2 A Critique of Basel 2.5 | 138 |
| 7.3 Basel 2 to Basel 3 | 142 |
| 7.4 The Basel 3 Provisions | 143 |
| 7.5 A Critique of Basel 3 | 146 |
| 7.6 The Verdict on Basel 3 and the Basel Culture | 149 |
| 7.7 Conclusion | 153 |
| 8 Bad Regulation: Short Selling | 155 |
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| 8.1 Introduction | 155 |
| 8.2 Some Preliminary Remarks | 156 |
| 8.3 The Past and Present of Short Selling | 159 |
| 8.4 Arguments for Short Selling | 162 |
| 8.5 Arguments against Short Selling | 168 |
| 8.6 The Regulation of Short Selling: A Critique | 174 |
| 8.7 Naked versus Covered Short Selling | 179 |
| 8.8 Conclusion | 181 |
| 9 Bad Regulation: High-Frequency Trading | 182 |
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| 9.1 Regulating the Unknown | 182 |
| 9.2 What is HFT? | 183 |
| 9.3 The Proclaimed Profitability of HFT | 188 |
| 9.4 HFT as the Cause of the Flash Crash | 193 |
| 9.5 Arguments against HFT | 194 |
| 9.6 The Case for and against the Regulation of HFT | 202 |
| 9.7 Conclusion | 204 |
| 10 Bad Regulation: Too Big to Fail, Bail-Out and Bail-In | 206 |
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| 10.1 Introduction | 206 |
| 10.2 The Concept of TBTF | 207 |
| 10.3 Evolution of the TBTF Doctrine | 208 |
| 10.4 Arguments for TBTF | 210 |
| 10.5 Arguments against TBTF | 212 |
| 10.6 Dealing with the Menace of TBTF | 215 |
| 10.7 Bail-Out versus Bail-In | 222 |
| 10.8 Conclusion | 224 |
| 11 Concluding Remarks | 226 |
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| 11.1 Recapitulation | 226 |
| 11.2 What is Good Regulation? | 227 |
| 11.3 Corruption as a Cause of Instability and Crises | 228 |
| 11.4 Banks Always Win | 229 |
| 11.5 Taleb's Ten Commandments | 230 |
| 11.6 Light at the End of the Tunnel? | 232 |
| References | 234 |
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| Index | 254 |
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