The concept of regulatory systemic risk – a long-term imbalance, resulting from the misalignment between regulatory initiatives and market realities, that impacts multiple areas of the regulatory framework – is developed in the context of US securities regulation. The discussion offers two...

The multi-trillion dollar market for, what was at that time wholly unregulated, over-the- counter derivatives (“swaps”) is widely viewed as a principal cause of the 2008 worldwide financial meltdown. The Dodd-Frank Act, signed into law on July 21, 2010, was expressly considered by Congress...

We document several effects of the Liquidity Coverage Ratio (LCR) rule on dealers' financing and intermediation of securities. For identification, we exploit the fact that the US implementation is more stringent than that in foreign jurisdictions. In line with LCR incentives, US dealers reduce...

A 2012 paper by Goodhart, Kashyap, Tsomocos, and Vardoulakis (GKTV) proposes a dynamic general equilibrium framework that provides a conceptual - and to some extent quantitative - framework for the analysis of macroprudential policies. The distinguishing feature of GKTV's paper relative to any...

U.S. financial regulation has traditionally made functional and institutional regulation roughly equivalent. However, the gradual shift away from Glass-Steagall and the introduction of the Financial Modernization Act (FMA) generated a disorderly mix of functions and products across institutions,...

U.S. financial regulation has traditionally made functional and institutional regulation roughly equivalent. However, the gradual shift away from Glass-Steagall and the introduction of the Financial Modernization Act (FMA) generated a disorderly mix of functions and products across institutions,...

Economists have dominated U.S. scholarship about the S&L debacle and they have universally viewed the regulatory response as horrific. This paper argues that the conventional economic wisdom is badly flawed. The U.S. regulatory response to the debacle was disastrous – when economists shaped it...

This article presents the following model of two regulatory classes of financial institutions interacting in financial and political markets to spur deregulation and riskier lending and investment, which in turn contributes to the severity of a financial crisis: 1) Regulation creates two...

After the Latin American Debt Crisis of 1982, the official response worldwide turned to minimum capital standards to promote stable banking systems. Despite their existence, however, such standards have still not prevented periodic disruptions in the banking sectors of various countries. After...