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| Author: | Squam Lake Working Group on Financial Regulation |
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| Publisher: | Council on Foreign Relations Press |
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Release Date: October 2009
8 pages
There are critical holes in the existing regulatory framework for handling large complex financial institutions that become impaired. This uncertainty makes it difficult for regulators to know the best way to restructure a financial institution or, indeed, whether restructuring is even feasible without enormous disruption. This Working Paper, the seventh in the Squam Lake Working Group series distributed by the Center for Geoeconomic Studies, endorses legislation that would give authorities the necessary powers to effect an orderly resolution of large complex financial institutions. As part of this authority, every such institution should be required to create its own rapid resolution plans, which would be subject to periodic regulatory scrutiny. These “living wills” would help authorities address the difficulties that might arise in a resolution.
The Squam Lake Working Group on Financial Regulation is a nonpartisan, nonaffiliated group of fifteen academics who have come together to offer guidance on the reform of financial regulation.
The group first convened in fall 2008, amid the deepening capital markets crisis. Although informed by this crisis—its events and the ongoing policy responses—the group is intentionally focused on longer-term issues. It aspires to help guide reform of capital markets—their structure, function, and regulation. This guidance is based on the group's collective academic, private sector, and public policy experience.
To achieve its goal, the Squam Lake Working Group is developing a set of principles and their implications that are aimed at different parts of the financial system: at individual firms, at financial firms collectively, and at the linkages that connect financial firms to the broader economy.
The members of the group are
Martin N. Baily
Brookings Institution
Andrew B. Bernard
Dartmouth College
John Y. Campbell
Harvard University
John H. Cochrane
University of Chicago
Douglas W. Diamond
University of Chicago
Darrell Duffie
Stanford University
Kenneth R. French
Dartmouth College
Anil K Kashyap
University of Chicago
Frederic S. Mishkin
Columbia University
Raghuram G. Rajan
University of Chicago
David S. Scharfstein*
Harvard University
Robert J. Shiller
Yale University
Hyun Song Shin
Princeton University
Matthew J. Slaughter
Dartmouth College
Jeremy C. Stein
Harvard University
René M. Stulz
Ohio State University
*David Scharfstein withdrew from the group when he accepted a position at the Treasury Department in September 2009.
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