home > think tank > center for geoeconomic studies > Squam Lake Papers > An Expedited Resolution Mechanism for Distressed Financial Firms: Regulatory Hybrid Securities
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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: April 2009
6 pages
This Working Paper, the third in the Squam Lake Working Group series distributed by the Center for Geoeconomic Studies, recommends support for a new regulatory hybrid security that will expedite the recapitalization of distressed financial companies. The new instrument resembles long-term debt in normal times, but converts to equity when the financial system and the issuing bank are both under financial stress. The regulatory hybrid security the authors envision would be transparent, less costly to taxpayers, and more effective than the ad hoc measures taken in the current crisis.
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
René M. Stulz
Ohio State University
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