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| Author: | Benn Steil, Senior Fellow and Director of International Economics |
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| Publisher: | Council on Foreign Relations Press |
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Release Date: March 2009
52 pages
ISBN 978-0-87609-432-7
$10.00
Council Special Report No. 45
A new report from the Council on Foreign Relations (CFR), Lessons of the Financial Crisis, calls for major economic reforms, both to avoid fueling excessive corporate and individual borrowing in the future and to make the financial system much more resilient in the face of falling asset prices. "The crisis offers a sobering lesson about the dangers of policies that fuel the rapid buildup of debt across the economy," says the report. "Excessive leverage in the economy needs to be prevented because credit does not return to normal once asset prices stop rising and start falling. It becomes dangerously scarce."
Although many are arguing that the crisis is a direct result of lax regulation, "U.S. monetary policy, taxation policy, and home ownership promotion policy were so conducive to credit expansion that the idea, understandably popular in Washington and Brussels, that preventing future such crises can be accomplished simply by waking up regulators ‘asleep at the switch' is dangerously simplistic," says Benn Steil, senior fellow and director of international economics at CFR. "The United States in particular, given that it effectively sets monetary and credit conditions for a significant portion of the global economy, needs to put in place policies that can better discourage, recognize, and curtail a credit boom, and ensure that systemically important financial institutions can withstand its unwinding." Steil lays out specific recommendations for reforming the international financial architecture, bank capital standards, borrower screening and monitoring, corporate and individual taxation regimes, over-the-counter (OTC) derivatives markets infrastructure, corporate governance, and monetary policy.
The report's recommendations include the following:
Benn Steil is senior fellow and director of international economics at the Council on Foreign Relations in New York. He is also the founding editor of International Finance, a top scholarly (ISI-accredited) economics journal, as well as a cofounder and managing member of Efficient Frontiers LLC, a markets consultancy. From 2002 to 2006 he was also a nonexecutive director of the virt-x securities exchange in London (now part of the Swiss Exchange). Prior to his joining CFR in 1999, he was director of the International Economics Programme at the Royal Institute of International Affairs in London. He came to the Institute in 1992 from a Lloyd’s of London Tercentenary Research Fellowship at Nuffield College, Oxford, where he received his MPhil and DPhil in Economics. He also holds a BSc in economics summa cum laude from the Wharton School of the University of Pennsylvania.
Dr. Steil has written and spoken widely on international finance, securities trading, and market regulation. His research and market commentary are regularly covered in publications such as the Wall Street Journal, Financial Times, New York Times, The Economist, and Reuters and Bloomberg outlets. His newest book, Money, Markets, and Sovereignty, was published by Yale University Press in February 2009. His previous book, Financial Statecraft: The Role of Financial Markets in American Foreign Policy, was named one of the Best Business Books of 2006 by Library Journal and an Outstanding Academic Title of 2006 by Choice. Among his earlier books are a critically acclaimed analysis of The European Equity Markets; a major text on Institutional Investors; a widely reviewed policy study on Building a Transatlantic Securities Market, which has been the topic of numerous conferences in North America and Europe; and edited volumes on cross-border antitrust (Antitrust Goes Global) and the economics of innovation (Technological Innovation and Economic Performance).
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