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An Expedited Resolution Mechanism for Distressed Financial Firms

Regulatory Hybrid Securities

<p>An employee of Bear Stearns leaves as demonstrators from the Neighborhood Assistance Corporation of America protest outside the Bear Stearns headquarters in New York on March 26, 2008.</p>
An employee of Bear Stearns leaves as demonstrators from the Neighborhood Assistance Corporation of America protest outside the Bear Stearns headquarters in New York on March 26, 2008. (Shannon Stapleton/Reuters)
  • Squam Lake Working Group on Financial Regulation

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.t

Report

The Pharma Choke Point

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