The Shadow Financial Regulatory Committee’s Views on Systemic and Payments System Risks

Robert Eisenbeis ()

Chapter 10 in Innovative Federal Reserve Policies During the Great Financial Crisis, 2018, pp 285-302 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter reviews the evolution of the Shadow Financial Regulatory Committee’s statements on payment system and systemic risk. Six major themes emerge. First, from the outset, the Committee has argued against forbearance and taxpayer bailouts and instead advocated early regulatory intervention and prompt corrective action to force recognizing losses and recapitalizing troubled institutions. Second, when taxpayer bailouts take place there is a pressing need to protect taxpayer interests. Third, the Committee favored regulatory simplicity over complexity when it comes to structuring capital requirements and macroprudential policies. Fourth, the committee favored market price mechanisms when it comes to structuring capital constraints. Fifth, market mechanisms and prices should also be relied upon to monitor risk. Finally, the Committee urged the Fed to modernize how it implements monetary policy and cease its reliance upon the primary dealer system as the main conduit for such policy.

Keywords: Monetary Policy; Financial History; United States of America; Federal Reserve; Housing; Macroprudential Regulation; Quantitative Easing; Financial-Stability Tool; Recession; Financial Crisis (search for similar items in EconPapers)
JEL-codes: G01 (search for similar items in EconPapers)
Date: 2018
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