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Abstract:
Ascertaining which enforcement mechanisms work to protect investors has been both a focus of recent work in academic finance and an issue for policy-making at international development agencies. According to recent academic work, private enforcement of investor protection via both disclosure and private liability rules goes hand in hand with financial market development, but public enforcement fails to correlate with financial development and, hence, is unlikely to facilitate it. Our results confirm the disclosure result but reverse the results on both liability standards and public enforcement. We use securities regulators' resources to proxy for regulatory intensity of the securities regulator. When we do, financial depth regularly, significantly, and robustly correlates with stronger public enforcement. In horse races between these resource-based measures of public enforcement intensity and the most common measures of private enforcement, public enforcement is overall as important as disclosure in explaining financial market outcomes around the world and more important than private liability rules. Hence, policymakers who reject public enforcement as useful for financial market development are ignoring the best currently-available evidence.

investor protection, public enforcement, private enforcement, securities regulation

Abstract:
Governmental bodies are increasingly incorporating the work of private credit rating agencies into regulatory standards. In this comment, Professor Jackson examines how a recent proposal of Basel Committee on Banking Supervision would extend this practice by factoring the credit ratings of borrowers into capital adequacy requirements for commercial banks. After reviewing various criticisms of the Basel Committee's proposal, the Comment considers alternative approaches to measuring the credit risk of commercial banks and concludes with a discussion of implications for regulatory policy in a global financial services industry.

Abstract:
In this paper we explore the allocation of regulatory responsibilities to market infrastructure institutions, administrative agencies and central government entities in the eight most influential jurisdictions for securities regulation in the world. After reviewing the academic literature on the role of self-regulatory organizations in the oversight of modern stock exchanges, we report the results of a survey of the allocation of regulatory powers in a sample of eight key jurisdictions. In that survey, we examine the allocation of such powers in three levels: rulemaking, monitoring of compliance with these rules, and enforcement of rules violations. Based on our findings, we categorize these jurisdictions in three distinct models of allocation of regulatory powers: a Government-led Model, that preserves significant authority for central government control over securities markets regulation albeit with a relatively limited enforcement apparatus (France, Germany, Japan); a Flexibility Model, that grants significant leeway to market participants in performing their regulatory obligations but relies on government agencies to set general policies and maintain some enforcement capacity (UK, Hong Kong, Australia); and a Cooperation Model that assigns a broad range of power to market participants in almost all aspects of securities regulation but also maintains strong and overlapping oversight of market activity through well-endowed governmental agencies with more robust enforcement traditions (US, Canada).

Abstract:
As the first installment of a two-part series, this Article reports the results of an empirical investigation designed to explore whether capital-raising practices in Europe in 1999 might illuminate the on-going debate in U.S. academic circles over the value of regulatory competition in international securities markets. Drawing on a series of 50 in-depth interviews with lawyers, investment bankers and regulators from London and other European financial centers, this Article presents new data about capital-raising practices in Europe in 1999. The authors find little evidence of the sort of market dynamics traditionally predicted by either proponents or critics or regulatory competition. Their research suggests that variations in the stringency of national systems of securities regulation across Europe is not a major factor in determining where and how European issuers access capital markets. Rather, European capital-raising practices seem to be heavily influenced by market forces that require issuers engaged in pan-European offerings to meet disclosure and due diligence standards modeled on and comparable to practices developed for private placements in the United States. The research also suggests that the growth of efficient trading linkages between European stock exchanges may diminish the need for European issuers to concern themselves with the legal requirements of other member states, a phenomenon not usually factored into discussions of regulatory competition in international securities markets.

Abstract:
This essay reviews differences in regulatory structure across sectors of the financial services industry in the United States and then explores the difficulties these differences pose to our current system of regulation and also to proposals for financial modernization. The Essay begins with a description of a range of financial transactions from simple contracts to pooled investment vehicles to complex financial intermediaries. After reviewing the policy justifications underlying regulation across the financial services industry, the Essay summarizes the distinctive regulatory structures that characterize U.S. oversight of each major sector of the industry: private contract, securities regulation, futures contracts, investment companies, depository institutions, insurance companies, and employee benefit plans. The essay then reviews the legal definitions that are used to classify which regulatory structure applies to which financial transactions. Distinctions are drawn between formal and functional definitions of financial products, and the Essay claims that functional definitions, which suffer from both overinclusion and indeterminacy, are typically bounded by four types of limitations: de minimus exceptions, sophisticated investor exclusions, institutional carve-outs, and extra-territorial exemptions. The Essay continues to review a series of recent legal disputes in which private parties and government regulators have disagreed over the application of this system of classifying financial products. The Essay then draws some preliminary conclusions as to why disputes over legal classifications of financial products are so common and concludes by exploring the implications of the foregoing analysis for recent proposals to modernize the U.S. system of financial regulation.

Abstract:
Given all the talk of regulatory convergence in financial markets, one would think that good data would be available regarding the actual intensity of financial regulation in developed countries as well as a robust literature about how to determine the optimal level of regulatory intensity for financial markets and financial institutions. As it turns out, neither data nor theories are well developed on these topics. In this paper, I discuss first the considerable difficulties of conducting a theoretically complete analysis of costs and benefits in the area of financial regulation as well as the problems associated in making international comparisons between the observed levels of the intensity of financial regulation across national boundaries. Notwithstanding these difficulties, I proceed to present some data about direct regulatory costs of financial regulation in the United States and then engage in some preliminary international comparisons. Even after making adjustments for the size of U.S. financial markets, the costs of financial regulation in the United States are substantially higher than the costs observed in most other jurisdictions. Moreover, common law jurisdictions, in general, seem to incur substantially higher regulatory costs than do civil law jurisdictions.

The paper also presents some additional evidence about the level of regulatory intensity in the area of securities regulation by reporting data on public and private securities enforcement actions in the United States in recent years, including data on both monetary and non-monetary sanctions. Compared to at least the United Kingdom and Germany, the intensity of securities enforcement actions in the United States appears to be strikingly higher. Not only are there more financial regulators in the United States, but they carry bigger sticks than their foreign counterparts. While law on the books may be converging, the level of enforcement efforts seems to vary widely across national boundaries and even within the regions, such as Europe.

The paper concludes with some thoughts about additional lines of research in this area and then touches briefly upon the implications of my data for the debate over regulatory convergence and for future lines of research.

Abstract:
This essay proposes a phased transformation of financial regulation in the United States to focus the Federal Reserve Board on oversight of market stability, including systemically important institutions throughout the financial services industry, and to assign all other regulatory functions, including routine supervision and consumer protection, to an independent consolidated agency.

I. The authority of the Federal Reserve Board to oversee financial market stability should be expanded to cover all sources of systemic risk in the financial services industry, should be structured to coordinate effectively with other supervisory agencies, and should be designed to allow for consistent, appropriate forms of intervention in response to systemic risks.

II. Even after the authority of the Federal Reserve Board has been expanded, the consolidation of other federal financial regulatory functions should proceed; the experience of other leading jurisdictions indicates that consolidated supervision offer numerous benefits in terms of the quality and completeness of financial regulation and that the principal objections to consolidated supervision can be met through statutory safeguards and institutional design.

III: Experience in other leading jurisdictions also demonstrates that many of the benefits of consolidated oversight can be achieved without the statutory consolidation of front-line supervisory units and the world's premiere consolidated agency, the British FSA, was established in a multi-stage process whereby the enactment and implementation of new substantive statutes did not occur until the FSA has been in operations for several years.

IV. Drawing on these experiences, U.S. regulatory consolidation should follow a four-stage process: 1) immediate enhancement of the President's Working Group on Financial Markets; 2) prompt enactment of legislation creating an independent United States Financial Services Authority (USFSA or Authority) to provide industry-wide oversight, coordinate existing regulatory structures, and lay the groundwork for combination of existing supervisory agencies; 3) a second round of legislation authorizing the merger into the USFSA all other federal supervisory agencies; and 4) resolution of the organizational structure of the Authority should be postponed until regulatory consolidation is complete.

V. This four-phase approach to regulatory consolidation improves the likelihood of successful transition by delaying controversial decisions, avoiding unnecessary steps, and providing an organizational structure that can lead reform while safeguarding continuity of supervision.

VI. The creation of a United States Financial Services Authority is also consistent with expansion of the Federal Reserve Board's role in overseeing market stability and would actually improve the capacity of the Board to perform that function effectively.

Financial Regulation, Financial Institutions, Systemic Risk, Consolidated Supervision

Abstract:
Although similarities between the British and American systems of financial regulation are often remarked upon in academic commentary, the organizational structure of financial supervision in the two countries has diverged substantially in the past decade, as the United Kingdom has now largely consolidated its financial regulatory agencies in the Financial Services Authority whereas the United States has maintained the world's most decentralized and fragmented collection of financial supervisory agencies. In this essay, Professor Howell Jackson explores various reasons why financial regulation in these two countries differs so dramatically in organizational structure. Focusing first on the differences in political economy that surrounded the enactment of the Financial Services and Markets Act of 2000 in the United Kingdom and the Gramm-Leach-Bliley Act of 1999 in the United States, Professor Jackson discusses deeper differences in the regulatory philosophies of the two countries and also presents data on the relative intensity of financial regulation in both jurisdictions. He speculates that the comparatively more ambitious regulatory agenda of the U.S. system pushes the country towards a more elaborate system of financial oversight that is inherently more difficult to consolidate. In the United Kingdom, in contrast, the goals of the financial regulators are more modest and, to the extent that cost efficiency is one of the country's regulatory objectives in the field of financial regulation, that policy tends to foster a less cumbersome system of financial regulation that more easily accommodates consolidation of regulatory functions. The paper concludes with some broader comparative data suggesting that while British financial regulation may be less intensive than financial regulation in the United States, it is substantially more intensive than financial regulation in many other jurisdictions, particularly civil law jurisdictions on the Continent.

Abstract:
How well did the Social Security system do last year? According to the most recent annual report prepared by system's Board of Trustees, the Social Security trust funds showed a $165.4 billion net increase in assets in 2002 and reported accumulated reserves of nearly $1.4 trillion by year end. Unfortunately, these glowing reports are a cash-flow illusion, revealing only the difference between the system's annual cash receipts and its yearly payments for benefits and administrative expenses. Were the finances of the Social Security system restated under principles of accrual accounting, which recognizes commitments to make future payments when those obligations are actually incurred, the Social Security trust funds would have had to report a loss of several hundred billion dollars in 2002. Moreover, as of December 31, 2002, an accrual-based balance sheet of the Social Security system would have revealed more than $14.0 trillion of accrued liabilities to Social Security participants and beneficiaries. Even allowing for the system's $1.4 trillion of accumulated reserves as well as the value of excess future taxes to be paid by current participants over the rest of their working lives, the Social Security trust funds had unfunded obligations on the order of $10.5 trillion as of year-end 2002. This implicit debt of the Social Security system is several times greater than the explicit debt burden of the federal government and is growing by hundreds of billions of dollars each year.

In addition to misrepresenting the magnitude of the Social Security system's looming financial crisis, the current accounting system for Social Security distorts public debate over Social Security reform proposals and confuses the relationship between Social Security and the rest of the federal budget. Accrual accounting, in contrast, would provide a clearer picture of the true state of the Social Security's current financial shortfall and the extent to which the system's burden on future generations is increasing each year. Accrual accounting would also create political incentives for our leaders to address Social Security's difficulties in a timely manner, and enhance the quality of public debate over the relative merits of competing reform proposals.

Social Security, accounting, federal budget, pensions, FASAB

Abstract:
The Transatlantic Financial Markets Dialogue led by the SEC and the European Commission has achieved some notable successes, particularly with respect to the consolidated supervision of financial conglomerates and the development of a plan to achieve convergence in corporate financial reporting. On both sides of the Atlantic there is a clear ongoing commitment to the Dialogue as a key mechanism for the development of efficient and credible regulatory solutions that guarantee effective investor protection and a high level of business efficiency. This paper reports on a two-day roundtable discussion that took place at Cambridge University, UK, in September 2005 to explore ways in which the academic community can contribute to this transatlantic debate. Lively discussion between the policymakers, regulators, market participants and academics who attended the roundtable yielded a number of thematic concerns, which, the paper suggests, could form the basis of a programme for further work. Finally, the paper announces the establishment of a seminar series, to be based in the UK, on the Transatlantic Financial Services Regulatory Dialogue and invites contributions.

Abstract:
This article presents the second installment of an empirical investigation into regulatory competition in international securities markets. It contributes to the current debate about competitiveness of U.S. capital markets by offering an account of transatlantic capital raising practices at the height of technology boom of the 1990s and before the passage of the Sarbanes-Oxley Act of 2002 and the corporate scandals that precipitated the Act. This article provides evidence that European issuers in the late 1990s were already turning away from U.S. public capital markets. While regulatory considerations appear to have played a role in that trend, even more important were the growing importance of private means of access of U.S. capital, the increased off-shore presence of U.S. institutional investors, and the relatively unsatisfactory trading performance of many foreign issuers that had gone to the trouble of obtaining U.S. public listings early in the 1990s. The picture of transatlantic capital raising presented in our survey suggests that the recent decline in competitiveness of U.S. capital markets may well be more a product of long-standing trends in global financial markets than a response to the Sarbanes-Oxley Act or other requirements of federal securities laws. We have supplemented our original analysis with a post-script from the vantage point of 2008 to draw connections between our findings and those of recent academic literature.

securities regulation, international finance, securities offerings, cross-border listing, Rule 144A, American Depositary Receipts, capital markets competitiveness

Abstract:
Trading screens allow investors to trade on an exchange without being physically present at the exchange or even in the same jurisdiction where the exchange is located. Europeans have repeatedly urged the United States to facilitate the placement of such remote trading screens from European exchanges in the United States. The U.S. Securities and Exchange Commission (the SEC or Commission), however, has objected to the placement of any such terminals in the United States unless the foreign marketplace first registers itself as a securities exchange under U.S. law. The controversy over remote trading screens is emblematic of a range of controversies between U.S. and E.U. regulators. Europeans see the SEC's position as an unvarnished act of economic protectionism, designed to preserve the position of the New York Stock Exchange and other U.S. trading markets. The SEC views its requirements as essential to safeguard U.S. investors from trading on inadequately regulated markets and from purchasing the securities of foreign issuers that do not comply with U.S. disclosure requirements.

This article argues that technological advances in the securities industry have to some degree mooted the controversy. Notwithstanding the SEC's efforts to insulate U.S. retail investors from overseas markets, there are other ways for U.S. residents to reach these venues. In light of these alternative trading channels, the principal effect of the SEC's rules on foreign trading screens for U.S. investors is to raise the cost of foreign investments and inhibit certain trading strategies. On the other hand, the SEC does not hinder cross-border competition among securities exchanges to the extent that many critics of the Commission have suggested.

While the issue of foreign trading screens has for many years been a peripheral issue in the E.U. - U.S. financial services dialog, the looming mergers of major European and U.S. exchanges might intensify the discussion about the regulatory treatment of trading markets that transcend international boundaries. At the same time, as disclosure requirements and accounting requirements head towards trans-Atlantic convergence in the next few years, regulatory officials may finally be able to resolve the controversy about the placement of foreign trading screens in the United States. Once the SEC has satisfied itself that accounting standards of European issuers are functionally equivalent to those applicable to U.S. firms, the Commission may find it much easier to liberalize its treatment of remote trading screens, at least those associated with European markets.

Abstract:
The International Bar Association's Securities Law Subcommittee of the Task Force on Extraterritorial Jurisdiction, comprised of a panel of academics, practitioners, senior in-house counsel at financial institutions and former regulators, has produced this report examining the need for reform of the regulation of the global securities markets. The report reviews approaches to addressing problems such as mutual recognition, regulatory convergence and disparities in enforcement intensity and makes a series of recommendations. The Subcommittee urges reform of domestic regulatory systems with a view towards its international impact and argues that such reform should be an urgent priority for legislative and regulatory bodies in major financial centers.

(Full list of Subcommittee members located in the text of the report.)

Securities regulation, mutual recognition, international finance, extraterritorial

Abstract:
In choosing financial products and services, consumers often rely on financial advisers to recommend products or services. With surprising frequency, these advisers receive side payments or other forms of compensation from the firms that provide the products or services the advisers recommend. Many times these payments are not clearly disclosed to consumers; often they are entirely secret. These practices, which I label the trilateral dilemma of financial regulation, raise concerns that advisers may be giving their customers biased advice. Side payments of this sort also have the potential to increase the cost of financial products and services. In this article, I describe how trilateral dilemmas have arisen in many different sectors of the financial services industry, including mortgage lending, retirement savings, investment management, insurance brokering, student loans, and banking services. I then review the many different regulatory strategies that Congress and regulatory agencies have employed to police trilateral dilemmas and assess the efficacy of these techniques in solving the problems that side payments of this sort pose. I also evaluate the possibility that side payments and other forms of indirect compensation may in fact be an efficient or at least innocuous means of financing the cost of distributing financial products and services. The article concludes with a brief discussion of how consumer education might address trilateral dilemmas.

financial institutions, agency costs, mortgage lending, predatory lending, student loans, mutual funds, pension plans, insurance companies, securities firms

Abstract:
This paper, which is to be published in a slightly altered form in a forthcoming Oxford University Press symposium volume on Regulatory Reform, addresses a problem confronting many developing countries: How should a country draw on foreign legal systems to develop its own system of financial regulation. Although addressed to a specific problem confronting the Kingdom of Nepal ? developing a regulatory structure that will encourage foreign financial firms to establish international operations in Nepal ? the paper presents a general framework for analyzing the utilization of foreign legal models for regulatory reform, and then advocates a particular reform strategy for Nepal: the selective incorporation of foreign legal systems into Nepalese law. Under the proposed system of selective incorporation, Nepal would first determine which foreign regulatory systems are sufficiently well-developed and well-administered to oversee foreign firms establishing international financial service operations in Nepal. Firms located in any of these selected jurisdictions could then apply to establish operations in Nepal without having to meet any additional Nepalese regulatory requirements, provided those applicant firms agreed to conduct their Nepalese operations in accordance with their home country?s regulatory requirements and to submit their Nepalese operations to home country supervision. So, for example, a British bank might establish operations in Nepal and be supervised under the law of England, whereas a Swiss bank with Nepalese operations might comply with Swiss law. In this way, selected foreign legal regimes would be incorporated into Nepalese law. After exploring the surprisingly large number of precedents for selective incorporation, this paper considers the advantages and disadvantages of this approach to regulatory reform for both Nepal and foreign financial firms. The paper then considers a number of possible objections to this approach, including the potential for inadequate supervision of Nepalese operations, the implications of the approach for countries whose laws are incorporated into Nepalese law, and the ramifications of the approach for the political economy of Nepal.

Abstract:
Every year, the Social Security Administration mails Social Security Statements to all eligible workers over the age of 25. These Statements include estimates of monthly retirement and other benefits that participants are projected to receive under the Social Security Act. The Statements also summarize Social Security Administration (SSA) records about participants' earnings history, which determines benefit levels, and provide various background information about the Social Security program and its finances. For many Americans, the Social Security Statement is the principal source of information about Social Security benefits. This paper analyzes the content of the current Social Security Statement. While the Social Security Statements are useful tools for certain kinds of financial planning and allow participants to check the accuracy of the Administration's records of their earnings history, the Statements may also lead participants to misinterpret the value of their Social Security benefits and may make it difficult for participants to compare Social Security benefits to other sources of retirement savings. In addition, the current Social Security Statements obscure the extent to which additional years of labor market participation increase the value of Social Security benefits. After reviewing the strengths and weakness of the current structure of Social Security Statements, the chapter then describes how these statements might be supplemented with estimates of the actuarial value of Social Securities benefits for individual participants. This supplemental information would make it easier for participants to compare Social Security benefits to other sources of retirement incomes, and would highlight the manner in which participants' Social Security benefits accrue over time thereby mitigating some of the labor market inefficiencies associated with Social Security payroll taxes. The chapter concludes with a review of several potential drawbacks of supplementing Social Security Statements with accrued values, including the possibility that this supplemental information would make it more difficult to change Social Security benefits in the future, the possibility that disclosing the accrued value of Social Security benefits could lead some workers to make offsetting reductions in other forms of retirement savings, and the possibility that this supplemental information might make the redistributive aspects of the Social Security system more transparent, potentially weakening support for the program among some constituencies.

Abstract:
In this essay written in honor of the retirement of Eddy Wymeersch, Professor Howell Jackson explores the manner in which European nations have moved towards more consolidated systems of financial regulation and discusses the implications of the European experience for the United States. While U.S. policy debates over regulatory reform often reduce to theoretical claims regarding the benefits and pitfalls of consolidation, the consolidation of oversight within the members states of the European Union offers many concrete examples of how consolidated supervision actually works. European experience demonstrates that there are many different ways in which to implement consolidated regulation, and often times the process of consolidation occurs gradually over a number of years. In addition to the expected advantages of increased efficiency and the elimination of regulatory gaps, European experience suggests that consolidated regulatory agencies often attract higher quality personnel and do a better job maintaining consistency across different sectors of the financial services industry. In addition, European reforms have devised a number of mechanisms to ensure that consolidated agencies remain politically accountable and resolve policy conflicts in an efficient and timely manner.

Financial Regulation, Consolidated Supervision, European Union, Regulatory Reform

Abstract:
Interest group pluralism presumes that public policy outcomes are determined principally through a contest for influence among organized pressure groups. Most interest groups, however, do not represent themselves in this process. Rather, they rely on professional lobbyists for representation, information, and advice. These lobbyists are agents with their own interests, and these interests may not align perfectly with those of their clients. This essay outlines this principal-agent problem and sketches its possible implications for policy outcomes. In particular, we hypothesize that the lobbyist-client agency problem may bias policy in favor of small homogeneous groups, may exacerbate status quo bias and lead to excessive attention to symbolic issues, may promote expansive delegations to administrative agencies, and may impede systematic reforms to the policy-making process.

administrative, law, public, policy, lobby, lobbyist, interest group

Abstract:
Over the past quarter century, consumer lending markets in the United States have become increasingly national in scope with large national banks and other federally chartered institutions playing an ever important role in many sectors, including credit card lending and home mortgages. At the same time, a series of court decisions have ruled that a wide range of state laws regulating credit card abuses and predatory mortgage lending practices are preempted at least as applied to national banks and other federally chartered institutions. Given the dominant role of federal institutions in our country's lending markets, these rulings have narrowed the capacity of states to police local lending transactions. As an alternative to direct regulation, the California Assembly recently considered legislation designed to improve consumer understanding of financial transactions through educational efforts to be financed by a new state tax on income from certain problematic loans made to California residents by financial institutions, including national banks and other federally chartered institutions. In this Article, we consider whether a tax of the sort proposed in California could survive a preemption challenge under recent court rulings as well as other potential constitutional attacks. While the States have quite limited powers to regulate federally chartered financial institutions, Congress in 12 U.S.C. Section 548 explicitly authorizes states to tax national banks. We explore the scope of state taxing authority that Section 548 and the relationship between that authority and recent preemption rulings After reviewing a range of legal precedents, we conclude that a state tax of the sort considered in California - which imposes modest levies on federally chartered entities but does not prevent these from engaging in otherwise authorized activities - should qualify as a legitimate exercise of state taxing powers under 12 U.S.C. Section 548 and also should withstand scrutiny under the Due Process and Commerce Clauses to the extent the tax is imposed on out-of-state banks.

Abstract:
This article addresses whether yield spread premiums are harmful to consumers and, if so, how the practice might be regulated. Yield spread premiums are payments made to mortgage brokers by lending institutions based on the rate of interest charged on a borrower's loan, with higher interest rates producing higher yield spread premiums payments. While the legality and merits of these payments have been hotly debated over the past decade - in federal courts, before Congress, and elsewhere - little academic writing has seriously grappled with the fundamental questions this paper addresses. After describing the regulatory framework for yield spread premiums, the article reviews the unresolved empirical questions underlying the policy and legal debates over these payments. The article then presents an empirical study of approximately 3,000 mortgage financings of a major lending institution, the results of which suggest that yield spread premiums allow mortgage brokers to extract materially higher payments from consumers than in transactions without such payments. Contrary to claims of industry representatives, the study suggests that consumers fail to fully recoup the cost of these payments. Our best estimate is that consumers get less than thirty-five cents of value for every dollar of yield spread premiums. The study also provides evidence that the payment of yield spread premiums may allow mortgage brokers to engage in price discrimination among borrowers, with the least sophisticated borrowers being particularly susceptible to abusive pricing practices. The article concludes with a brief discussion of the implications of these results for the regulation of yield spread premiums.

Mortgage, broker, yield spread premium, agency costs, RESPA

Abstract:
Public discussion of federal fiscal policy typically focuses on several familiar metrics of performance, including the total deficit, the level of public debt and percentage of federal spending committed to mandatory spending and net interest payments. While useful, these measures are based on accounting conventions developed years ago, and do not capture many of the ways in which the federal government now commits public resources, including obligated budget authority, guarantees associated with various government insurance programs, retirement benefits for federal workers and military personnel, and - most substantially - federal social insurance programs such as Social Security and Medicare. Collectively these programs and activities represent substantial and largely overlooked current commitments of future federal resources. After reviewing current measures of fiscal performance, the article presents several alternative ways to quantify federal financial performance over the first half of this decade utilizing more comprehensive measures of mounting federal financial obligations. So, for example, while the commonly reported total deficit of the federal government in FY2005 was $318 billion, a more comprehensive measure of fiscal results over the course of the same year would have shown a deterioration in the country's net financial position in excess of $3.3 trillion - that is, an order of magnitude larger. To promote more informed debate and encourage more responsible public leadership, the more comprehensive measures of fiscal performance described in this article should be adopted as the primary metrics for reporting the financial performance of the federal government. (US, Canada).

Abstract:
Responding to recent claims that looming federal surpluses would disrupt U.S. capital markets if partially invested in private financial assets, this short essay argue that projected surpluses are not so substantial when compared with the likely size of U.S. capital markets at the end of the end of the decade when the bulk of the surpluses are projected to arise. The essay also notes several reasons why Congress should retain discretion to invest in private financial assets under certain circumstances.

Abstract:
The EU Financial Markets Dialogue led by the SEC and the European Commission has achieved some notable successes, particularly with respect to the consolidated supervision of financial conglomerates and the development of a plan to achieve convergence in corporate financial reporting. On both sides of the Atlantic, there is a clear ongoing commitment to the dialogue as a key mechanism for the development of efficient and credible regulatory solutions that guarantee effective investor protection and a high level of business efficiency. This paper reports on a two-day roundtable discussion that took place at Cambridge University in September 2005 to explore ways in which the academic community can contribute to this transatlantic debate. Lively discussion between the policy-makers, regulators, market participants and academics who attended the roundtable yielded a number of thematic concerns, which, the paper suggests, could form the basis of a programme for further work. Finally, the paper announces the establishment of a seminar series, to be based in the United Kingdom, on the Transatlantic Financial Services Regulatory Dialogue and invites contributions.

financial markets, regulation, European Union, Transatlantic, Dialogue, cross-border services

Abstract:
This working paper, which will appear as a chapter of Framing the Social Security Debate (forthcoming Fall 1998) (Brookings Institution Press), discusses two regulatory problems associated with the privatization of social security: first, the risk that political interference with social security investments in equity securities will disrupt private capital markets and reduce returns on social security assets, and, second, risks associated with variations in investment return that individual participants might experience under a privatized social security system. In brief, the paper suggests that, while the investment of social security assets in private equity markets could give rise to problems of political interference in those markets, there are various ways in which such investments could be structured and managed that would reduce the likelihood of these problems actually arising. As to concerns that political interference might reduce expected returns on social security assets, the paper argues that past experience in other areas of financial regulation suggest that any reduction in returns from political interference is likely to be less substantial than the expected increase in financial returns associated with transferring a portion of social security investments into equity markets. With regard to variations in individual returns, the paper reviews various reasons why some individuals might be expected to experience lower rates of return under a privatized social security system than they do under our current system, even though privatization might generally be expected to increase average returns on social security assets. The paper then considers a variety of regulatory tools that could be employed to reduce the range of variation in individual returns.

Abstract:
This essay, written as an entry for the New Palgrave Dictionary of Economics and the Law, explores the justifications for imposing special regulations on financial holding companies. The essay argues that the justifications for regulating financial holding companies derive from the same policies that justify regulating financial intermediaries directly. But because these direct regulations are not completely effective, supplemental regulation at the holding company level is often required. After reviewing the basic elements of holding company regulation from this perspective, the essay concludes with a discussion of several unresolved questions involving the regulation of financial holding companies.