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Policy Briefs

Pew Financial Reform Project

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Pew Financial Reform Project Briefs

In an effort to educate both policy makers and the public, the Pew Economic Policy Group Financial Reform Task Force has commissioned a series of reports examining individual financial reform issues in detail.  Task Force members and outside scholars are among the authors of these reports.  Pew has provided support for the publication of these reports, but takes no position on the recommendations made within them.

Task Force Members:


  • Charles Taylor, Project Director

  • Martin Baily, The Brookings Institution
  • Alan Blinder, Princeton University
  • Charles Calomiris, Columbia University
  • Rodgin Cohen, Sullivan & Cromwell
  • Martin Crowley, Pew Financial Reform Project
  • Morris Goldstein, The Peterson Institute for International Economics
  • Darryll Hendricks, UBS
  • Richard Herring, The Wharton School, University of Pennsylvania
  • Robert Litan, Kauffman Foundation
  • Avi Persaud, Intelligence Capital Limited
  • Benn Steil, Council on Foreign Relations
  • John Taylor, Stanford University
  • Peter Wallison, The American Enterprise Institute

Reform Project Staff:

  • Joseph Kennedy
  • Gordon McDonald
  • Joan Riggs
  • Demis Mavrellis
  • Pew Financial Reform Project National Poll: Major Findings, Mar 25 2010

Read: Summary View: Document

  • Wind-Down Plans as an Alternative to Bailouts - Richard J. Herring

Mar 08, 2010 - In this briefing paper, Richard J. Herring examines the G-20’s recent recommendation that systemically-important financial institutions (SIFIs) should develop firm-specific resolution plans. These plans would be approved by regulators and would provide a guide for resolving a failed firm without resorting to a government bailout. Herring describes what provisions such “wind-down plans” should contain, and how their adoption could benefit financial markets over the long term.

  • Principles of Financial Reform: A Bipartisan Policy Statement - Financial Reform Task Force

Dec 02, 2009 - The financial crisis of 2008 revealed shortcomings in financial regulation that contributed significantly to a near-collapse of the U.S. financial system.  The Task Force, a group of prominent scholars and financial market experts formed in May 2009, is working to build bipartisan consensus on the major federal financial reform issues. This document contains the principal recommendations of the Task Force signatories.

  • Policy Issues Concerning the Reform of the Credit Rating Agencies - Richard J. Herring

Nov 19, 2009 - In this briefing paper, Richard J. Herring proposes the establishment of a private board with a public mandate to set securitization standards and to encourage their adoption. This Securitization Transaction Approval Review (STAR) Board of leading participants in securitization markets, including institutional investors, would have the mandate to improve the transparency of these markets and to realign the incentives of each agent, including the Credit Rating Agencies, with those of final investors.

  • Lombard Street: Volume 1, Issue 16 - Charles Taylor and Gordon McDonald

Nov 16, 2009 - Charles Taylor and Gordon McDonald act as Guest Editors for Lombard Street Volume 1, Issue 16. Lombard Street is the first ever e-journal focused exclusively on financial services regulation. In this issue of Lombard Street, Financial Reform Project Task Force members and authors offer commentary on the consolidation of bank regulators.

  • Systemic Risk in the Financial System: Insights from Network Science - Ross A. Hammond

Oct 21, 2009 - This paper looks at systemic risk from the perspective of network structure, and the connectivity links between actors in the financial system. It notes that network structure may have played a role in the financial crisis in three important ways: that financial markets may have lacked robustness; that the pattern of network links may have made the system subject to contagion; and that a lack of diversity in networks may have impaired their resilience, or ability to adapt.

  • The Case for an Orderly Resolution Regime for Systemically-Important Financial Institutions - H. Rodgin Cohen and Morris Goldstein

Oct 21, 2009 - The Obama Administration has proposed that the government be given special authority to resolve a nonbank financial institution if its failure could have serious systemic effects. This new Orderly Resolution Regime (ORR) is needed because the existing regime confronts US economic and regulatory authorities with two very unappealing options: allow the institutions to go into corporate bankruptcy, thereby accepting the associated systemic risk, or to weigh in (often over a weekend) with a large government rescue.

  • Managing Systemic Risks - Charles Taylor

Oct 06, 2009 - In this paper, Pew Financial Reform Project Director Charles Taylor develops an operational definition of systemic risk management as a combination of six specific areas where governments can act: resilience and robustness, monitoring, response, SSI oversight, failing institutions, and crisis management. The paper explores what each of these possible elements of systemic risk management might involve.

  • Reassessing the Regulatory Role of the Fed: Grappling with the Dual Mandate and More? - Charles Calomiris

Oct 06, 2009 - In this paper, Task Force member Charles Calomiris argues that the Federal Reserve should be removed from day-to-day micro supervision and regulation to avoid its politicization, which threatens the independence of monetary policy and the effectiveness of regulation. The macro prudential regulator (whether the Fed or a council of regulators) should develop a formal modeling framework for measuring systemic financial risk, which it would defend publicly. Monetary policy should also be rules-based. The Fed should formally adopt as a benchmark some specific inflation target and a Taylor Rule associated with that target. Calomiris also recommends that higher prudential regulatory standards should be imposed on larger, more complex financial institutions, and proposes a two-part approach for reforming resolution policy for large banks and nonbank financial institutions.

  • Banking Crises Yesterday and Today - Charles Calomiris

Sep 29, 2009 - In this paper, Charles Calomiris surveys the history of banking crises and traces unusual bank fragility to risk-inviting banking rules established by governments. Unlike financial crises, which appear to be a common and fairly constant feature of the economic cycle, historical evidence suggests that banking crises cannot be seen as an inevitable result of human nature, or the liquidity transforming structure of bank balance sheets, and adverse macroeconomic circumstances alone are not sufficient to produce banking crises. Calomiris concludes that history teaches us that regulatory policy often responds to banking crises, but not always wisely.

  • Consumer financial protection: advantages, dangers and should it be a new agency? - Martin Baily

Sep 29, 2009 - In this briefing paper Martin Baily identifies key structural provisions of the Treasury’s proposed CFPA, enumerates some concerns that have been raised about it, argues for a more balanced perspective on consumer protection, and offers some recommendations.

  • Quantifying the Effects on Lending of Increased Capital Requirements - Douglas J. Elliott

Sep 24, 2009 - In this paper, Douglas J. Elliott shows that the U.S. banking industry could likely adjust to higher capital requirements on loans through a combination of actions that would not wreak havoc on the system. Not surprisingly, Elliott argues, the adjustments would need to come from a set of actions, since the rebalancing appears tough to achieve with any single move. Fortunately, the banks do have a variety of levers to pull which should allow them to make the transition. Elliott suggests that findings imply that there would likely be relatively small changes in loan volumes by U.S. banks as a result of higher capital requirements on loans retained on the banks’ balance sheets. The various actions required to restore an acceptable return on common equity appear unlikely to be large enough, even in the aggregate, to significantly discourage customers from borrowing or move them to other credit suppliers in a major way.

  • What does international experience tell us about regulatory consolidation? - Adriane Fresh and Martin Neil Baily

Sep 21, 2009 - In this note, Adriane Fresh and Martin Baily examine the current structure of financial regulation in several major economies, and prior efforts to reform the financial regulatory architecture in those countries, to see what lessons the United States may draw from those experiences.

  • A G-20 Primer - Michael Crowley

Sep 18, 2009 - In this background note, Crowley provides an overview of the G-20 as a heads-of-state meeting, reviews the outcome of the two recent G-20 meetings, and discusses the agenda for the Pittsburgh meeting.

  • Comparing the Paulson Blueprint with the Geithner White Paper - Gordon McDonald

Sep 10, 2009 - In the note, McDonald compares the financial reform proposals in the Paulson Treasury's "The Blueprint for a Modernized Financial Regulatory Structure" with those in the Geithner Treasury's report, "Financial Regulatory Reform, A New Foundation: Rebuilding Financial Supervision and Regulation." Among other areas, the note focuses on: consumer protection, the role of the Fed, resolution authority, derivatives regulation, credit rating agency reform, executive compensation reform, insurance regulation, and housing GSEs reform.

  • How Should We Regulate Derivatives Markets? - Darrell Duffie

Aug 25, 2009 - In this briefing paper, Darrell Duffie provides background on the derivatives markets and their role in the financial crisis. Duffie also evaluates aspects of the main reform proposals before Congress that are believed, in varying degrees, to reduce systematic risk or improve the efficiency of the derivatives markets. They are: centralized clearing, improved price transparency, improved position transparency, migration of over-the-counter trading to exchanges, speculative position limits, and improved corporate governance in the area of risk management.

  • The Argument Against a Government Resolution Authority - Peter J. Wallison

Aug 18, 2009 - In this briefing paper Peter Wallison argues that although the terms “systemic risk,” or “systemic breakdown” can be defined in words, they cannot be used as an effective guide for policy action. As a result, Wallison contends, granting the government the authority to resolve nonbank financial institutions would be harmful to the financial system and the economy in general. Instead, Wallison suggests that failing nonbank financial institutions, both large and small, should be allowed to go into bankruptcy.

  • The Consumer Financial Protection Agency - Adam J. Levitin

Aug 06, 2009 - Levitin offers a guide to the issues involved in creating a CFPA. The paper reviews the current state of consumer protection in financial services; describes the criticisms of the current regulatory regime; explains how a CFPA could address the criticisms of the current regulatory system and; details the potential concerns about a CFPA.

  • Systemic Risk and the Role of the Federal Reserve - Alice Rivlin

Jul 29, 2009 - In this briefing paper Alice Rivlin recommends that the Federal Reserve not be given any major new regulatory duties over specific institutions, but instead be given responsibility for monitoring the stability of the financial system and new tools to reduce emerging systemic risks.

  • Choosing Financial Regulatory Agency Mandates - Charles Taylor

Jul 18, 2009 - This note discusses how U.S. legislators can address the difficult problem of choosing between different ways of dividing up the responsibilities of federal financial regulatory agencies.

  • Defining Systemic Risk - Darryll Hendricks

Jul 08, 2009 - In this note, Darryll Hendricks argues that before getting into the issues of the organization of systemic risk regulation legislators and regulators need to agree on the nature of the problem. This note discusses different ideas for defining systemic risk and systemic risk management.