The SquamLakeReport:Observationsfromtwopolicyprofessionals

The SquamLakeReport(SLR)containsahostofrecommendationsto‘‘fixthefinancial sector.’’Acrediblefixmusttakeontheexcessiverisk-takingoffinancialinstitutions createdwhenuninsuredcreditorsofimportantfinancialinstitutionsexpectgovernment protectionfromloss(i.e.,thetoo-big-to-failproblem).ThevastmajorityofSLR’s recommendationsconstituteimportantcontributionstoaddressingTBTF;theanalysis offered insupportofrecommendationsissoundandbringsmoderneconomicsand financetobear.TheclarityandfocusofSLRoffersamodelforacademicswritingfor a policyaudience. We differinemphasiswithSLRonafewissues,includingcapitalandlivingwills,but supportmovingforwardwiththecoreofSLR’srecommendationseveninthesecases. Legislation(i.e.,‘‘Dodd–Frank’’)seekingtofixthefinancialsectorbecamelaw around thetimeSLRwaspublished.Thelegislationincludesinoneformoranother the predominanceofcrediblerecommendationsmadetoaddressTBTF,includingthe majorityofthoseinSLR.Theultimatesuccessofthelegislation,however,dependson implementation.Wehopethegovernmentfocusesonamacroprudentialregimethat reducesfalloutfromfinancialspillovers,considersneweffortstomeasureandtax expectedTBTFsubsidies,andreconsidersaspectsofDodd–Frankthatexpandthesafety net. Giventhestakes,anotherSLR-calibereffort,thistimecenteredonDodd–Frank implementation,promiseshighreturns