This paper attempts to explain the international policy consequences of the 2008 global financial crisis by comparing the regulatory response in Europe to that in the United States. Specifically, it accounts for the level of cooperation between the two jurisdictions in their efforts to improve oversight of the financial system. The paper is concerned primarily with the regulatory laws, agreements, and frameworks enacted since 2008, as efforts to improve financial regulation are ongoing and only starting to reach the implementation phases. Still, implementation plays a meaningful role in the analysis, as variation in implementation capacity among jurisdictions often shapes the breadth and depth of oversight. This paper also seeks to demonstrate that international cooperation in financial regulation is constrained by an incentive to defect, which arises from short-run negative effects of oversight on the profitability of financial institutions. Finally, the paper shows that the sheer complexity of the financial system, especially with respect to the derivatives market, is itself a hindrance to the creation of transatlantic regulatory standards.



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