All CFR Reports

Credit Default Swaps, Clearinghouses, and Exchanges

Credit Default Swaps, Clearinghouses, and Exchanges

Author: Squam Lake Working Group on Financial Regulation

Credit default swaps (CDS) are contracts that provide protection against the risk of default by borrowers. The failure of one important participant in the CDS market can destabilize the financial system by inflicting significant losses on many trading partners simultaneously. A clearinghouse could in theory reduce counterparty risk by standing between the buyer and seller of protection, insulating the counterparties’ exposure to each other’s default. This Working Paper, the fifth in the Squam Lake Working Group series distributed by the Center for Geoeconomic Studies, analyzes the market for credit default swaps and makes specific recommendations about appropriate roles for clearinghouses and about how they should be organized.

See more in United States; Financial Markets; Financial Regulation

The Canadian Oil Sands

The Canadian Oil Sands

Author: Michael A. Levi

The Canadian oil sands present an important challenge to policymakers: they promise energy security benefits but present climate change problems. Michael A. Levi assesses the energy security and climate change effects of the oil sands and makes recommendations for U.S. policymakers within the context of broader bilateral relations with Canada.

See more in Canada; Climate Change; Oil

Reversal in Iraq

Reversal in Iraq

Author: Stephen D. Biddle

Iraq is currently in the early stages of a negotiated end to an intense ethnosectarian war. As such, there are several contingencies in which recent, mostly positive trends in Iraq could be reversed, threatening U.S. national interests. This Center for Preventive Action Contingency Planning Memorandum by Stephen Biddle assesses four interrelated scenarios in Iraq that could derail the prospects for peace and stability in the short to medium term and posits concrete policy options to limit U.S. vulnerability to the possibility of such reversals.

See more in Iraq; Wars and Warfare

A Systemic Regulator for Financial Markets

A Systemic Regulator for Financial Markets

Author: Squam Lake Working Group on Financial Regulation

Financial regulations in almost all countries are designed to ensure the soundness of individual institutions, principally commercial banks, against the risk of loss on their assets. This focus on individual firms ignores critical interactions between institutions and can also cause regulators to overlook important changes in the overall financial system. The solution: One regulatory organization in each country should be responsible for overseeing the health and stability of the overall financial system. This Working Paper, the fourth in the Squam Lake Working Group series distributed by the Center for Geoeconomic Studies, argues that the central bank should be charged with this important new responsibility.

See more in Financial Regulation; Financial Markets; Global

U.S. Nuclear Weapons Policy

U.S. Nuclear Weapons Policy

This report finds that nuclear weapons will remain a fundamental element of U.S. national security in the near term, and makes recommendations on how to ensure the safety, security, and reliability of the U.S. deterrent nuclear force, prevent nuclear terrorism, and strengthen the nuclear nonproliferation regime.

See more in Proliferation; United States

If the U.S. Dollar Plummets

If the U.S. Dollar Plummets

Author: Brad W. Setser

The scale of financing needed to support the U.S. fiscal deficit—together with the Federal Reserve’s policy of keeping U.S. interest rates low to ward off deflation—has revived concerns about a sudden and sharp depreciation of the U.S. dollar. This Center for Preventive Action Contingency Planning Memorandum by Brad W. Setser examines potential triggers and indicators of such a crisis and posits concrete policy options to limit U.S. vulnerability to the possibility of a plummeting dollar.

See more in United States; Monetary Policy

The Evolution and Future of Donor Assistance for HIV/AIDS

The Evolution and Future of Donor Assistance for HIV/AIDS

Authors: Kammerle Schneider and Laurie Garrett

This Working Paper, a contribution to the aids2031 project, focuses on the future of donor financing for HIV prevention and treatment programs and makes recommendations for what the donor community and national governments can do now to build a foundation that ensures steady, long-term funding for HIV/AIDS and alleviates the impact of future challenges.

See more in Foreign Aid; Global; Diseases, Infectious

The National Interest and the Law of the Sea

The National Interest and the Law of the Sea

Author: Scott G. Borgerson

Seaborne commerce remains the linchpin of the global economy. And beyond trade, a host of other issues, ranging from climate change and energy to defense and piracy, ensure that the oceans will hold considerable strategic interest well into the future. In this report, Scott G. Borgerson explores an important element of the maritime policy regime: the United Nations Convention on the Law of the Sea. He examines the international negotiations that led to the convention, the history of debates in the United States over whether to join it, and the strategic importance of the oceans for U.S. foreign policy today.

See more in United States; Oceans; Treaties and Agreements

Reforming Capital Requirements for Financial Institutions

Reforming Capital Requirements for Financial Institutions

Author: Squam Lake Working Group on Financial Regulation

This Working Paper, the second in a series from the Squam Lake Working Group distributed by the Center for Geoeconomic Studies, argues that regulators consider systemic effects when setting bank capital requirements. Everything else the same, capital requirements should be proportionately higher for larger banks, banks that hold more illiquid assets, and banks that finance more of their operations with short-term debt. But capital requirements are not free. When designing capital requirements that address systemic concerns, regulators must weigh the costs such requirements impose on banks during good times against the benefit of having more capital in the financial system when a crisis strikes.

See more in Global; Financial Markets; Financial Regulation

A New Information Infrastructure for Financial Markets

A New Information Infrastructure for Financial Markets

Author: Squam Lake Working Group on Financial Regulation

Information about prices and quantities of assets lies at the heart of well-functioning capital markets. In the current financial crisis, it has become clear that many important actors—both firms and regulatory agencies—have not had sufficient information. Distributed by the Center for Geoeconomic Studies, this Working Paper proposes a new regulatory regime for gathering and disseminating financial market information. The authors argue that government regulators need a new infrastructure to collect and analyze adequate information from large (systemically important) financial institutions. This new information framework would bolster the government's ability to foresee, contain, and, ideally, prevent disruptions to the overall financial services industry.

See more in United States; Financial Markets; Digital Infrastructure

Eurasian Energy Security

Eurasian Energy Security

Author: Jeffrey Mankoff

This report looks at Russia's rise as an energy power, analyzing its control of supplies and delivery systems and its investments in energy infrastructure across Europe, as well as questions about the potential of its production, recognizing that European dependence on Russian energy will be a reality well into the future and that Europe can increase its energy security only by working with--not against--Russia.

See more in Europe; Energy Policy; Russian Federation

War About Terror

War About Terror

Author: Daniel B. Prieto

Seven years after 9/11, there is still no durable framework for effectively securing the United States against terrorism while also upholding its values. This Working Paper by Daniel B. Prieto calls on President Obama and Congress to engage these issues in a bipartisan fashion and craft comprehensive long-term counterterrorism policies that reaffirm the U.S. commitment to core values; only then will the United States be able to develop the kind of foreign policy necessary to meet the modern terrorist threat.

See more in United States; Terrorism and the Law

Preparing for Sudden Change in North Korea

Preparing for Sudden Change in North Korea

Authors: Paul B. Stares and Joel S. Wit

North Korea has long been a serious concern to Washington. Now, with President Kim Jong-Il reportedly in bad health and possibly naming a successor, the United States must consider possible outcomes should the situation deteriorate and the current North Korean government collapse. This report examines the challenges that these scenarios would pose--ranging from securing Pyongyang's nuclear arsenal to providing humanitarian assistance--in the context of the interests of the United States and others in its valuable recommendations.

See more in North Korea; Conflict Prevention

The Future of Foreign Assistance Amid Global Economic and Financial Crisis

The Future of Foreign Assistance Amid Global Economic and Financial Crisis

Author: Laurie Garrett

Though the United States of America faces its toughest budgetary and economic challenges since the Great Depression, it cannot afford to eliminate, or even reduce, its foreign assistance spending. For clear reasons of political influence, national security, global stability, and humanitarian concern the United States must, at a minimum, stay the course in its commitments to global health and development, as well as basic humanitarian relief. In this report, Laurie A. Garrett makes recommendations for the future of foreign aid under a new presidential administration and Congress.

See more in Global; Foreign Aid; Financial Crises

Averting Crisis in Ukraine

Averting Crisis in Ukraine

Author: Steven Pifer

This report comprehensively analyzes Ukraine's difficulties, related to both domestic conditions and foreign policy, and recommends ways for the United States to encourage Ukraine on a path of stability and integration with the West.

See more in Conflict Prevention; Ukraine

GCC Sovereign Funds: Reversal of Fortune

GCC Sovereign Funds: Reversal of Fortune

Authors: Brad W. Setser and Rachel Ziemba

For several years, high oil prices enabled the Gulf Cooperation Council countries to add large sums to their state coffers. Falling oil prices imply that some Gulf countries may need to draw on their depleted funds to cover their import bills. In this Center for Geoeconomic Studies Working Paper, Brad W. Setser and Rachel Ziemba examine the impact of the fall in global equities on the Gulf’s large funds and explore how various oil price scenarios could shape those funds’ future growth.

See more in Regional Security; Middle East and North Africa; Sovereign Wealth Funds