Other Reports

Various reports from CFR, posted at the discretion of CFR's president and director of studies.

Regulation of Executive Compensation in Financial Services

Author: Squam Lake Working Group on Financial Regulation

Many people argue that inappropriate compensation policies in financial companies contributed to the global financial crisis. Some say the overall level of pay was too high. Others criticize the structure of pay, claiming that contracts for CEOs, traders, and other professionals induced them to pursue excessively risky and short-term strategies. This Working Paper, the eighth in the Squam Lake Working Group series distributed by the Center for Geoeconomic Studies, argues that governments should generally not regulate the level of executive compensation at financial firms. Instead, a fraction of compensation should be held back for several years to reduce employees' incentives to take excessive risk.

See more in Financial Crises; Corporate Regulation; United States

Improving Resolution Options for Systemically Relevant Financial Institutions

Author: Squam Lake Working Group on Financial Regulation

This Squam Lake Working Group Paper endorses legislation that would give authorities the necessary powers to effect an orderly resolution of large complex financial institutions. As part of this authority, every such institution should be required to create "living wills" that would help authorities address the difficulties that might arise in a resolution.

See more in Financial Crises; Corporate Regulation; United States

The Gloomy Prospects for World Growth

Author: Steven Dunaway

In this Center for Geoeconomic Studies Working Paper, Steven Dunaway argues that the world economy faces the prospect of a prolonged period of slower growth. Other sources of demand need to be found to take up the slack left by slower U.S. growth. However, the prospects for this do not look good, as none of the other major economies appear inclined to make the necessary changes in policies to deal with their imbalances and raise their demand.

See more in Financial Crises; International Finance

Understanding the Armed Groups of the Niger Delta

Author: Judith Burdin Asuni

Nigeria's underdeveloped but oil-rich Niger Delta region currently is the site of a crippling insurgency. Fueled by a complex mixture of protest, crime, and political corruption, the network of armed groups that create this instability pose serious problems both for Abuja and for oil-importing countries across the globe. This Working Paper provides insights into these militias' origins, characteristics, and interactions with one another.

See more in Nigeria

Regulation of Retirement Saving

Author: Squam Lake Working Group on Financial Regulation

Retirement saving is undergoing a fundamental change as employers shift from defined benefit pension plans to defined contribution plans, such as 401(k) accounts. This Working Paper, the sixth in the Squam Lake Working Group series distributed by the Center for Geoeconomic Studies, analyzes the pros and cons of defined contribution plans and recommends measures that will improve the performance of the nation's retirement saving system.

See more in United States; Financial Crises; Aging

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

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

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

An Expedited Resolution Mechanism for Distressed Financial Firms: Regulatory Hybrid Securities

Author: Squam Lake Working Group on Financial Regulation

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.

See more in Financial Crises

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

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

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

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

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

A Global Education Fund: Toward a True Global Compact on Universal Education

Author: Gene B. Sperling

In this Center for Universal Education Working Paper, Gene B. Sperling argues that there are important design elements of the existing global education architecture—the Education for All Fast Track Initiative—that reflect a promising model for a coordinated, global effort on education that should be built upon. Yet he also finds that a new Global Education Fund must employ serious reforms and have a major rebranding and relaunching moment by heads of state that mobilizes a greater global commitment to more resources and sound program implementation to make significant steps toward achieving quality universal education for the world’s poorest children.

See more in Education; Global

Fragility, Instability, and the Failure of States: Assessing Sources of Systemic Risk

Author: Monty G. Marshall

This Center for Preventive Action Working Paper surveys existing approaches to assessing state fragility and failure within the context of development, conflict, and governance. It examines the risk factors that have been identified through systematic inquiry and research with the goal of improving the prospects for successful conflict prevention and management, and argues that the goal of "early warning" relating to state fragility and failure should be more to inform and temper our expectations for policy response than to trigger costly and risky interventions.

See more in Conflict Prevention