Systemic Risk : What Is It, Why Is It Important, and What Can We Do About It?

Professors Calomiris and Haber paint a bleak picture – that is, historically populist political bargains over U.S. banking policy have become so entrenched that the most severe systemic crisis in memory, and accompanying Great Recession, may do little to spark effective policy reforms. Even if we realize this pessimistic prediction, however, our financial sector could more reliably fuel economic opportunity if information about risks of “systemwide failures” was more readily available. This article reviews how markets for information about not only the prospects for realizing systemic risks, but also the efficacy of regulatory efforts to mitigate those risks ex ante, might facilitate such an important improvement