Posts filed under “Bailouts”
Remarks Before the Peterson Institute of International Economics
Commissioner Kara M. Stein
June 12, 2014
Thank you, Adam, for the kind introduction. I also would like to thank the Peterson Institute for International Economics for hosting me today.
I, like all of you in this room, believe we need to have strong, vibrant capital markets if we want to have a healthy, job-creating economy. Our capital markets must be built on a foundation that is strong enough to withstand the next storm. During the Great Recession, we started a discussion about how to help insulate us when the next crisis comes.
The next financial crisis may come from any direction. My job is to help figure out where the next crisis may come from, and how to minimize the damage it would cause. That means we must identify systemic risks and mitigate them. Today, we have convened to continue this conversation and discuss what the SEC can do to better prevent the buildup and transmission of risks that can take down our entire financial system.
I’m going to begin our discussion today with a quick reminder of how we got here. And then, I’m going to focus on the three key areas where the SEC can play a critical role in addressing systemic risks. First, we need to step outside of our silo and think broadly and cooperatively with our fellow regulators, both domestic and international. Second, we need to focus on improving the stability and resiliency of the short-term funding markets, including securities lending and repurchase agreements (repo). Third, we need to re-examine how we evaluate capital, leverage, and liquidity within the financial institutions and funds we regulate.
With the financial crisis in the rear view mirror, many forget the forces that converged in 2007. Some even deny the impact of the recession, optimistically viewing our financial markets and our economy as inoculated from a virus that spread quickly and wreaked havoc on a global economy. Yet, studies demonstrate that the Great Recession continues to affect both attitudes and behaviors. A recent survey found that the generation entering the workforce now – the Millennials, who are 21 to 36 years old – have the same fiscally conservative views as the generation that exited the Great Depression. Millennials are skeptical of the financial markets and long-term investing, yet we increasingly depend on them to invest and drive our economy.
I, too, am crisis-scarred. And I share a dream with these Millennials. I dream of never facing another financial crisis. I want to do my part to avoid ever having to face another one. The events of 2008 are indelibly etched into my memory. In 2008, while I was working for Senator Jack Reed, our country’s economic leaders began closed-door briefings with members of Congress. Concerned about the unfolding financial crisis, the Chair of the Federal Reserve and the Secretary of Treasury pleaded for help and for an unprecedented financial intervention to stave off another Great Depression. They wanted tools to protect our Nation from an invisible force that came to be known as systemic risk. A comprehensive strategy was developed to stabilize our economy and unlock the credit markets in order to save our financial system.
Post Credit Crisis Job Creation Source: Oregon Office of Economic Analysis Last week’s jobs report has returned the U.S. economy back to its peak pre-recession levels of employment. (there is a debate about the quality of jobs being created, but we shall save that conversation for another time). As the Oregon Office of Economic…Read More
click for larger version Source: BV, FT This morning we discussed the danger that arises from merely fining banks instead of prosecuting them for violating laws. Since the news cycle is focusing on the potential multibillion-dollar fines for BNP Paribas SA and Bank of America Corp., let’s have a look at the amount of…Read More
Since 2008, the U.S. authorities have meted out $87.53 billion in fines to global banks. That number comes from data complied by the Financial Times. Some people believe that bankers are finally getting their due, being hit with billion-dollar penalties for their recklessness. I don’t see it that way; rather, it looks like little more…Read More
Monetary Rules: Theory and Practice Frameworks for Central Banking in the Next Century Policy Conference Hoover Institution Stanford, CA May 30, 2014 Charles I. Plosser President and Chief Executive Officer Federal Reserve Bank of Philadelphia Highlights President Charles Plosser discusses his views on the benefits of a systematic and rule-like approach to monetary policy. President…Read More