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Transparency is key to resolving the current crisis.

April 13, 2009

Analysis of:The Derivatives Markets Transparency and Accountability Act of 2009 | agriculture.house.gov

Successful financial systems require coordination between lenders and borrowers. This coordination is possible when agents in the financial system can trust each other and relieve future uncertainty. Asymmetric information drives this lack of trust. Transparency enhancing laws reduce this asymmetric information and restores coordination in the financial system. Thus transparency laws help financial systems to work efficiently.But if these laws leads to the failure of some institutions then even good laws can lead to bad outcomes.

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