kroszner & shiller (eds.) - reforming u.s. financial markets; reflections before and beyond dodd-frank (2011)

[...]... papers by Kroszner and Shiller and the comments of the four discussants, however, makes clear that their value is not diminished by the passage of this new legislation The issues they address are more fundamental, and the concrete proposals they offer go well beyond the scope of what Congress enacted Dodd-Frank may or may not prove to be the end of the story for U.S financial reform for the near- or even... fact only a beginning of a dialogue on how to move our financial system into the twenty-first century Democratizing and Humanizing Finance 3 We need to understand the issues so that we can be thoroughgoing in our reforms, and so that we can carry them even further than Dodd-Frank and other legislation has done to date Dodd-Frank has many aspects, but it could be said that it consists largely of a reorganization... Federal agencies, by state and local governments, and by self-regulatory organizations (SROs) outside of the government, to close gaps in regulation that contributed to the crisis For example, since the subprime crisis began in 2007 the Securities and Exchange Commission (SEC) has strengthened its examination and oversight of broker-dealers, investment advisers, and mutual funds, and has stepped up investigations... certain regulatory frameworks, and regulators who understand their business needs and objectives, will cease to be viable, and cease to provide risk management services that their customers have come to expect Indeed, Dodd-Frank, with its Financial Services Oversight Council plan, leaves existing regulators (with the exception of the Office of Thrift Supervision) intact and mostly just coordinates their... Duesenberry and Gregory Mankiw, who served with me on the committee that xvi Introduction chose the subject for this symposium; to Helen Gavel, who helped arrange the symposium’s logistics; to John Covell, for his support in bringing these proceedings to publication; and especially to Randall Kroszner and Robert Shiller, as well as my three fellow discussants, for contributing their papers and comments... leverage—the amount of assets they hold compared to the base of invested capital that supports them—to record levels Leverage of twelve- or fifteen-to-one was not uncommon among the large U.S commercial banks, and many investment banks had ratios of twenty-five- or even thirtyto-one As a result, once these firms began to incur losses on their trading operations, they had little cushion with which to absorb... to migrate to the least-regulated countries This problem creates an important role for the G20, the Financial Stability Forum, and other international agencies.10 This point was emphasized by the President and the U.S Treasury (2009) Fairness and Trust Research in behavioral economics, notably Kahneman, Knetsch, and Thaler (1986), has shown that public notions of what is fair and what is unfair represent... Jobs,” featured Jagdish Bhagwati and Alan Blinder The papers and discussions from each of these prior symposia have also been published by the MIT Press 1 Democratizing and Humanizing Finance Robert J Shiller The world financial crisis that began with the subprime crisis in 2007 and continues today will be a historic occasion for regulatory reform Serious instabilities and inconsistencies have been discovered... Partnership (PPIP 2009), and the Term Asset-Backed Securities Lending Facility (TALF 2009) These were dramatic measures, accompanied by massive bailouts of private corporations, a doubling of the Federal Reserve balance sheet, and an unprecedented sudden expansion of banks’ excess reserves and the money supply These steps are extraordinary by the standards of past recessions, and have little basis in... failure in the absence of government assistance Banks stopped lending, and the market in which many companies regularly issued commercial paper effectively shut down Unable to borrow, both businesses and families cut their spending The economic downturn was under way Introduction xiii The papers offered here by Randall Kroszner and Robert Shiller, together with the remarks of four commentators, explore . the future and allow us to pursue our goals and inspirations with more satisfactory outcomes. The U. S. government has been taking a large number of unusual steps to rescue the fi nancial system. cause and a consequence of the ongoing rise in house prices; less onerous lending conditions spurred demand for houses, while the rising value of the underlying collateral lessened concerns. Includes bibliographical references and index. ISBN 97 8-0 -2 6 2-0 154 5-5 (hbk. : alk. paper) 1. Finance—United States—Congresses. 2. Financial crises—United States—Congresses. 3. Global Financial