This memo aims to support the Volcker Alliance's project on financial regulatory reform by providing a comprehensive account of the asset management industry in the United States: its structure, participants, and activities; how it is regulated; how it has evolved in recent years, particularly...

The Glass-Steagall Act of 1933 effected a separation of commercial and investment banking in two ways. First, it prohibited the affiliation of the two types of banks. Second, it prohibited commercial banks from engaging in investment banking activities, and investment banks from receiving...

Moral hazard plays a central role in almost every narrative of the recent financial crisis: government's implicit guarantees led to excessive risk-taking, and when the guarantees turned explicit, it exacerbated moral hazard going forward. The moral hazard narrative of crisis causes and effects...

This essay explores proposed regulations meant to prevent a reoccurrence of the "Too Big to Fail" crisis of 2008. The new regulations, which are likely to go into effect in 2015, have two key features. First, a "Single Point of Entry" provision allowing regulators to more effectively and...

A comprehensive approach to minimizing the long-term costs of financial crises must include efforts to train regulators to respond effectively to crisis dynamics when they arise. An important gap exists, however, in our current approach: a uniquely effective building block for developing...

The greatest regulatory challenge emerging from last decade's financial crisis was the problem of “too-big-to-fail” financial institutions — those firms whose failure could trigger widespread runs in the financial system. When such firms faltered in 2008, regulators faced the dilemma of...

A systemically important financial institution (“SIFI”) unable to survive on its own can damage the broader economy, whether the firm defaults or the government rescues it. Regulators need good information about the location and magnitude of risks in the system in order to try to prevent...

Most analyses of the financial crisis of 2007-2008 assign a large causal role to inflated credit ratings. The ratings flaw most directly implicated in the crisis involved “second-level” mortgage securitizations: individual mortgages were pooled and securities sold against them, and some of...

The U.S. dollar serves both as the domestic currency of the United States and as the dominant international currency for trade, settlement, and reserve purposes. The dollar’s international status provides significant benefits for the United States, but one aspect of the global dollar system as...