Other Report

PrintPrint EmailEmail ShareShare CiteCite
Style:MLAAPAChicagoClose

loading...

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

A Squam Lake Working Group Paper

Author: Squam Lake Working Group on Financial Regulation

An Expedited Resolution Mechanism for Distressed Financial Firms: Regulatory Hybrid Securities - an-expedited-resolution-mechanism-for-distressed-financial-firms-regulatory-hybrid-securities

Publisher Council on Foreign Relations Press

Release Date April 2009

6 pages

Share

Overview

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.

More About This Publication

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

More on This Topic

Other Report

Prime Brokers and Derivatives Dealers

Author: Squam Lake Working Group on Financial Regulation

Runs by prime-brokerage clients and derivatives counterparties were a central cause of the global financial crisis. These runs precipitated...

Other Report

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,...