It is over five years since the peak of the financial crisis and more than three years after the passage of the Dodd-Frank Act. A core policy goal of post-crisis regulatory reform, both in the U.S. and internationally, is to prevent the recurrence of financial crisis, or at least to minimize its impact on the broader economy and to control the moral hazard arising from the socialization of losses and the privatization of gain in a complex global financial system. This seminar will focus on several key areas of systemic risk where the regulators, both in the U.S. and via the G-20, have made concrete progress proposing or implementing regulations designed to lower systemic risk in the global financial system.
In particular we will address three topics:
1. The effort to avoid financial institutions that are too big to fail through creation of an orderly liquidation regime, bail in of debt and living wills.
2. Activities restrictions such as those proposed by the Volcker Rule, Vickers, Liikanen and Neo-Glass-Steagall proposals.
3. Enhanced supervisory oversight of systemically important financial institutions via capital and otherwise.
For each topic we will consider the applicable statutory provisions and the relevant political economy concerns that affected their shaping; the recently promulgated or proposed regulations; and how various stakeholders would be affected by these rules and thus the positions they would advance in the regulatory process.
Students will be evaluated on the basis of team projects during the semester and a reflection paper.
Prerequisite: Regulation of Financial Institutions, Architecture of Financial Regulation, Issues in Global Regulatory Reform, Financial Institutions and Financial Crises or with permission of instructor.